Treasury Wine Estates Annual Report 2020

FY2020 Annual Report · Treasury Wine Estates

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25 August 2020

ASX ANNOUNCEMENT

TWE 2020 Annual Report

Treasury Wine Estates Ltd (ASX:TWE) is pleased to present its Annual Report for the year
ended 30 June 2020.

For the purposes of ASX Listing Rule 15.5, TWE confirms that this document has been
authorised for release to the market by the Board.

Contacts:

Media
Melissa O’Neill
Tel: +61 3 8533 3923
Mob: +61 467 555 175

Investors
Bijan Taghian
Tel: +61 3 8533 3568
Mob: +61 433 173 664

T R E A S U R Y W I N E E S T A T E S L I M I T E D
A B N 2 4 0 0 4 3 7 3 8 6 2
L E V E L 8 , 1 6 1 C O L L I N S S T R E E T
M E L B O U R N E V I C 3 0 0 0 A U S T R A L I A
W W W . T W E G L O B A L . C O M

TREASURY
WINE ESTATES

ANNUAL REPORT 2020

THINKERS
MAKERS
DOERS

WORLD-CLASS WINES

WE ARE THE CUSTODIANS OF A DISTINCTIVE
PORTFOLIO OF PREMIUM BRANDS
Behind every bottle of wine, is a world-class team of thinkers, makers,
doers passionate about creating moments of joy and connection

CONTENTS

About TWE
At a Glance
Chairman and Chief Executive Offi cer’s Report
Brand Highlights
Operating and Financial Review
Corporate Responsibility
Diversity and Inclusion
Board of Directors
Corporate Governance
Directors’ Report
Auditor’s Independence Declaration
F20 Remuneration Report (Audited)

Consolidated Statement of Profi t or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Details of Shareholders, Shareholdings
and Top 20 Shareholders
Shareholder Information

65
66
67
68
120
121
127

128

1
2
3
6
10
29
31
34
36
40
43
44

IMPORTANT INFORMATION

This report contains certain forward looking statements, which may be identifi ed by the use of terminology including ‘expects’, ‘believes’, ‘targets’,
‘likely’, ‘should’, ‘could’, ‘intends’, ‘aims’ or similar expressions. Indicators of and guidance on future earnings and fi nancial position are also forward
looking statements. These forward looking statements are not guarantees or predictions of future performance and involve known and unknown
risks, uncertainties and other factors, many of which are beyond the control of TWE, and which may cause actual results to differ materially from
those expressed or implied in such statements. Further information on important factors that could cause actual results to differ materially from
those projected in such statements is included in the Material Business Risks section of the Operating and Financial Review. Readers are cautioned
not to place undue reliance on forward looking statements.

References to ‘TWE’, ‘Company’, ‘Group’, ‘we’, ‘us’ and ‘our’ are to Treasury Wine Estates Limited and/or, except where the context otherwise
requires, its subsidiaries. References to ‘F19’ and ‘F20’ are to the periods 1 July 2018 to 30 June 2019 and 1 July 2019 to 30 June 2020 respectively.
All currency referred to in the report is in Australian dollars, unless otherwise stated.

In this report Hong Kong Special Administrative Region of the People’s Republic of China has been referred to as ‘Hong Kong’.

ABOUT TWE

We make premium wines from the great wine making
regions of the world and are the custodians of distinctive
brands that delight wine-lovers all over the world.

3,000

employees

70+

countries

regions

12,600

hectares

We employ approximately
3,000 talented people
across the globe

Our iconic wines are sold
in more than 70 countries
across the world

OUR LOCATIONS1

We are focused on four
principal regions across
the world: Australia and
New Zealand; the Americas;
Europe, Middle East and
Africa (EMEA); and Asia

We access approximately
12,600 planted hectares
of vineyards in some of the
world’s most sought-after
winemaking regions

TWE EMEA
TWICKENHAM, UK

TWE EMEA
BORDEAUX, FRANCE

TWE EMEA
TUSCANY, ITALY

TWE AMERICAS
OAKLAND, CALIFORNIA

TWE ASIA
SHANGHAI, CHINA

TWE ASIA
SINGAPORE

TWE ANZ MAGILL,
SOUTH AUSTRALIA

TWE ANZ
MARLBOROUGH

TWE ANZ
MELBOURNE, VICTORIA

AUSTRALIA & NEW ZEALAND2

AMERICAS2

EMEA2

vineyards

8,676

planted hectares

wineries

vineyards

498

planted hectares

winery

vineyards

3,213

planted hectares

wineries

vineyards

193

planted hectares

wineries

AUSTRALIA
Corporate head office:
Melbourne, Victoria

NEW ZEALAND
Country head office:
Marlborough

ASIA

Regional head offices:
CHINA | Shanghai
SINGAPORE

US | Regional head office:
Oakland, California

UK | Regional head office:
Twickenham, Middlesex

FRANCE | Country head
office: Margaux, Bordeaux

ITALY | Country head
office: Gabbiano, Tuscany

1. Locations marked on the global map represent corporate

and regional head offices. TWE also maintains other major
operations across all regions of its business.

2. Information current as at 30 June 2020.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 1

AT A GLANCE1,2

• F20 EBITS3 down 21.7% to $533.5 million; EBITS margin down

4.0 percentage points to 20.1%

• EPS (before material items and SGARA) down 25.5% to 43.9 cents per share

• Return on Capital Employed decreased 3.3 ppts to 10.6%

• Final dividend of 8 cents per share (fully franked); bringing F20 annual

dividend to 28 cents per share; down by 26% on the prior period

• Full year cash conversion of 94.7%

EBITS
(A$ million)

0
.
4
4
5

6
.
3
6
4

1
.
1
4
3

0
.
1
8
6

5
.
3
3
5

F20

21.7%

decrease

EPS (BEFORE MATERIAL ITEMS AND SGARA)
(Earnings Per Share) (cents)

9
.
8
5

9
.
3
4

1
.
9
4

8
3

F20

25.5%

decrease

3
.
9
2

F16

F17

F18 F19 F20

F16

F17

F18 F19 F20

ROCE
(Return on Capital Employed) (%)

9
.
3
1

7
.
1
1

6
0
1

4
.
0
1

9
.

F20

3.3 ppts

decrease

MARKET CAPITALISATION
(A$ million)

13.16

9.23

17.39 14.92

10.48

0
.
0
0
5
,
2
1

0
.
9
2
7
,
0
1

9
.
3
1
7
9

0
3
1
8
6

0
4
5
5
7

F20

30%

decline in market
capitalisation

F16

F17

F18 F19 F20

F16

F17

F18 F19

F20

Share price
($ at 30 June)

1. Unless otherwise state, all figures and percentage movements are stated on a reported currency basis and are subject to rounding.
2. Prior years have been restated for application of AASB 16 Leases and AASB 112 Income Taxes, as per note 32 in the Financial Statements.
3. Earnings before interest, tax, SGARA and material items.
4. Compound Annual Growth Rate.

2 | TREASURY WINE ESTATES ANNUAL REPORT 2020

CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT

Fiscal 20 was a unique and challenging year for TWE, our
industry and the markets within which we operate. The quality,
dedication and resilience of our team during this time, working
alongside our customers and suppliers, provides confidence
in our ability to become an even stronger business.

PAUL RAYNER Chairman

TIM FORD Chief Executive Officer

INTRODUCTION

Dear shareholders,

We are pleased to present the 2020 Annual Report
for Treasury Wine Estates Limited.

Fiscal 2020 has been a challenging year for many
of us. The COVID-19 global pandemic has changed
the way many of us live and work, and disruption
arising from the government-mandated restrictions
across our key markets has impacted our operating
performance. Shifting market place dynamics in the
United States, driven by the structural oversupply
of Californian wine, created specific challenges
to navigate throughout the year.

At the time of preparing this Annual Report,
TWE had been advised that the Chinese Ministry
of Commerce had initiated an anti-dumping
investigation into Australian wine exports into
China. This decision matters deeply to our business
and the industry, both in Australia and China. We
remain committed to China as a priority market and
will continue to invest in our local operating model,
team and our relationships with customers and
consumers to enhance the wine category and grow
our contribution to China. We will work co-operatively
with the Chinese and Australian governments at all
levels to resolve the situation.

Through the outstanding efforts of our team and
valued partners we continued to safely operate our
business. This demonstrates the resilience of our
operating models as well as our ability to innovate
and deliver collaborative customer and stakeholder
partnerships that responded to the changing needs
of our customers and consumers, and the environment
in which we operate.

The combined strength of our team, iconic portfolio
of brands and our competitively advantaged business
models gives us confidence that we are well-positioned
to come through this period a stronger business.

OVERVIEW OF RESULTS

In F20, Group EBITS decreased 21.7% to
$533.5 million, delivering a five-year EBITS CAGR
of 19.7%, while our EBITS margin decreased
4.0 percentage points to 20.1%.

The key drivers of the lower EBITS in F20 were an
unfavourable volume and portfolio mix during the
second half of F20 because of COVID-19 impacts,
driven by lower luxury sales due to the closure of
key channels for high-margin luxury wine in addition
to consumers trading down in some markets.

Strong progress was made throughout the year on
those strategic initiatives designed to accelerate our
premiumisation strategy.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 3

CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT (CONTINUED)

We completed the design and implementation of the
new operating model and organisational structure
in our Americas region, and started work on the
potential divestiture of specific commercial brands
and related assets, along with the restructuring
of the supporting supply chain.

In F20, we also announced our decision to explore
a demerger of the Penfolds brand and business. The
work completed has validated expectations that value
will be created through a separate focus for Penfolds
and TWE’s other brands, and we continue to explore
the best operating model and structure to drive long
term growth and value creation.

Our iconic portfolio of brands continued to find new
ways to connect and excite consumers throughout the
year as government-mandated restrictions changed
how they connected and celebrated with family and
friends such as Stags’ Leap virtual tasting room and
Wolf Blass’ partnership with Deliveroo in the UK.

TWE continued to drive category leadership with
19 Crimes disrupting the wine market by announcing
a multi-year partnership with entertainment
icon Snoop Dogg to celebrate the release of its first
Californian red wine. Squealing Pig also launched
its Rosé Gin and Pepperjack expanded beyond its
celebrated Shiraz and Cabernet Sauvignon to release
new varietals including a Malbec with grapes sourced
from Argentina.

The rich heritage of our brands was showcased
this year with Penfolds celebrating its 175-year
anniversary as well as 60 years of Bin 389, while
Stags’ Leap reached 125 years and the Beaulieu
Vineyard celebrated its 80-year anniversary with a
bespoke partnership with wine glass maker Riedel.

All regions contributed to our F20 result, with key
elements as follows:

• Americas reported a 36.9% decline in EBITS

to $147.3 million and an EBITS margin of 13.8%
(down 6.8 ppts). The key drivers were challenging
US wine market conditions throughout F20 and
the COVID-19 driven closure of key sales channels
outside retail and e-commerce through 2H20.
TWE’s portfolio of focus brands continued to
perform well, delivering the continuation of
premiumisation in the region through F20.

• Asia reported a 13.9% decline in EBITS to

$243.7 million and an EBITS margin of 39.5%
(up 0.3 ppts), with volume lower through Q320 as
key consumption occasions for wine were impacted
by government-mandated restrictions throughout
the region. Positive trends were noted in Q420,
with TWE seeing consumption and sales depletion
recovery across the portfolio, particularly in June.
TWE also performed strongly in e-commerce during
the period.

• Australia & New Zealand (ANZ) reported a 15.6%
decline in EBITS to $133.3 million and an EBITS
margin of 22.5% (down 3.7 ppts). The drivers of
performance were the COVID-19 driven closure
of key channels apart from retail and e-commerce,
along with consumers trading down to lower
price points.

• The Europe, Middle East and Africa (EMEA)
region reported an 18.3% decline in EBITS
to $51.7 million and an EBITS margin of 14%
(down 2.9 ppts), with strong performance in UK
retail offset by declines in Continental Europe and
in the Middle East & Africa, which were impacted
by government-mandated key channel closures.

CORPORATE RESPONSIBILITY

Our commitment to creating long term value by
being sustainable in everything we do and shaping
a positive future for everyone who touches our business
and products continued to be a focus through the year.

Over a year that has seen significant change, we
continued to drive our Corporate Responsibility agenda,
which is focused on our four pillars of Performance,
Planet, People and Product, and further integrated
our priorities into our business strategy and alignment
to external financial reporting benchmarks.

Progress included the implementation of our
Taskforce on Climate-Related Financial Disclosure
(TCFD) roadmap into business strategy, financial and
risk management processes, the launch of our Global
Packaging Guidelines and targets, and advancement
of our Human Rights Roadmap.

4 | TREASURY WINE ESTATES ANNUAL REPORT 2020

In 2020 many of our communities faced significant
challenges from drought and bushfire through to the
health and economic impacts of the COVID-19 global
pandemic. We maintained our commitment to support
those most vulnerable in our communities through a
mix of volunteering, charitable donations and product
donations. We have also directly supported our team
with counselling and support services and regular
engagement programs to strengthen our people’s
mental health and wellbeing. During this time, we
also provided our employees with a range of processes,
tools and activities to keep our people physically and
mentally safe and healthy during the COVID-19
global pandemic.

We are proud once again to present the Company’s
Sustainability Report which will be released
in September and be made available online at
www.tweglobal.com/sustainability.

BALANCE SHEET STRENGTH AND DIVIDEND

TWE maintains financial metrics that are consistent
with an investment grade credit profile.

The Company’s balance sheet continues to be strong,
efficient and flexible. Lease adjusted net debt/
EBITDAS was 2.2x in F20 reflecting maintenance
of the investment grade credit profile. Total capex
for the year was $188.8 million of which maintenance
and replacement spend was $82.6 million, in line with
our guidance. Growth capex of $106.2 million included
investment in our luxury winemaking infrastructure,
vineyard acquisitions and IT investments.

Cash conversion of 94.7% was above the guided 60-70%
range, Earnings Per Share declined 26% to 43.9 cents
per share, and Return on Capital Employed decreased
3.3 percentage points to 10.6% due to lower EBITS.

THANKS AND CONCLUSION

Looking ahead, we remain optimistic in our ability
to return to sustainable profit and margin growth over
the medium to long-term. Supporting this optimism is
our comprehensive strategic agenda, which is focussed
on building upon what is already a very strong
business and positioning it for the next phase of
TWE’s growth journey and the achievement of our
ambition to be the world’s most admired premium
wine company.

We believe TWE is well positioned to navigate the
near-term challenges associated with the health and
economic impacts of the COVID-19 global pandemic.
The quality, dedication and resilience of our team
during this time, working alongside our customers
and suppliers, provides confidence in our ability
to become an even stronger business.

With that in mind, we would like to thank our team
for their outstanding efforts during the year, for the
care they have shown each other and for the way
in which they have responded in the face of these
challenges. We are proud to have a diverse, high
calibre team that is committed to realising the
potential for our business.

We also want to take this opportunity to acknowledge
Mike Clarke for the transformative contribution that
he made to TWE during the past six years. The
growth and success of our business and significant
improvement in our operating and financial performance
over his tenure reflects Mike’s strong and decisive
leadership, and as a result TWE is a stronger and
better positioned business today.

In closing, we would like to extend our thanks
to you, our shareholders, for your ongoing belief
and investment in, and support of, TWE.

For F20, TWE is pleased to declare a final dividend
of 8 cents per share, fully franked, which brings the
total dividend for F20 to 28 cents per share.

Kind regards,

Paul Rayner
Chairman

Tim Ford
Chief Executive Officer

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 5

BRAND HIGHLIGHTS

PENFOLDS

100-point Special Bin
111A caps off Penfolds’
175th Anniversary
In 2019, Penfolds celebrated its 175th anniversary
with a year-long celebration marked by new wine
releases and special events. The celebrations
culminated in October when the brand hosted a gala
event at Magill Estate. More than 100 guests from
across the globe gathered to commemorate its history,
people and wines. As part of the celebrations, Penfolds
also hosted the first global influencer event which
generated more than 12 million impressions and
unveiled a new, rare wine representing the pinnacle
of our winemaking endeavour – Special Bin 111A
Clare Valley Barossa Valley Shiraz 2016.

Penfolds Celebrate 60 Years of
Bin 389 with Special Chinese
New Year Limited Edition

Penfolds released
a limited edition
60th Anniversary
‘Year of the Rat’
Bin 389 magnum.
The release was
supported by a
global activation.
This is the first
time Penfolds
executed a global
pull through
program across
every region. It
was supported by
powerful in-store
creative featuring
unique auspicious
number animations.

WOLF BLASS

Wolf Blass Launches
Makers’ Project
Bringing the craft, education and excitement back
into the wine category, Wolf Blass launched Makers’
Project with six new wines across two tiers. Pink
Pinot Grigio, Shiraz Grenache, Pinot Noir, Reserve
Pinot Three, Reserve Shiraz and Reserve Rosé.
This refreshingly innovative range explores winemaking
techniques such as free run wine; partial whole berry
fermentation and early press to deliver its delicious and
category defining offers. The introduction of Makers’
Project was designed to grow the wine category
penetration through the ‘Discover More and Spend
More’ category drivers, with a focus on new and younger
consumers whilst remaining true to the core portfolio.

6 | TREASURY WINE ESTATES ANNUAL REPORT 2020

PEPPERJACK

Pepperjack Drives Innovation
for the Category
With a focus on innovation to meet the dynamic,
ever-changing needs of consumers, Pepperjack
expanded beyond Shiraz and Cabernet Sauvignon
to produce four outstanding wines – Malbec, Grenache,
Sangiovese and Chardonnay. Pepperjack Malbec is a true
standout. In a first for Pepperjack, Winemaker, Richard
Mattner, sourced grapes internationally and travelled
to Argentina personally to craft the wine, ensuring
the Pepperjack style and quality was not compromised.
The brand underwent a packaging refresh with a new look
and feel that stands out on shelf, maintains its key assets
and appeals to consumers already familiar with the brand.

TWE

SQUEALING PIG

This Little Pig Launches
a Rosé Gin
In July 2019 Squealing Pig launched an exciting new
product, the Squealing Pig Rosé Gin – a refreshing
Gin crafted with 10 botanicals and a dash of their
award-winning Squealing Pig Rosé wine. Released
in response to Australian’s love affair with Rosé and
a boom in Gin sales, Squealing Pig combined these
two categories together to debut the first Gin sold
in Australia containing Rosé wine. With an alluring
pale salmon colour, Squealing Pig Rosé Gin is dry,
light and refreshing with subtle juniper, bright
citrus flavours and balanced spices.
The addition of the rosé wine gives it
a delightful hint of lifted strawberry
on the finish. The innovative new
release has been another success
for the brand, which teamed
up with internationally renowned
drinks figurehead Jason Crawley
to bring some creative
ideas to bars and
bottle shops for
the launch.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 7

TWE Brands Ace the
Australian Open
TWE returned as the Official Wine Supplier for the
Australian Open 2020. In 2020, TWE served up a
stellar selection of wines from across its Australian
portfolio. As part of the new multi-year deal, a selection
of wines, including wines in can, were available at the
event’s restaurants. In addition, a selection of Victorian
wines were showcased at The Vault tasting room.
Led by Mornington Peninsula based label, T’Gallant,
The Vault offered tennis fans a complete cellar-door
experience with the ability to enjoy fresh, food-friendly
wines alongside top drops from fellow Victorian
wineries Seppelt, Coldstream Hills and St Huberts
The Stag. In addition, Penfolds’ acclaimed Magill
Estate Restaurant activated at The Glasshouse during
week two of the Australian Open, with executive chef
Scott Huggins designing an exclusive menu, paired
alongside some of the label’s most sought-after wines.

BRAND HIGHLIGHTS (CONTINUED)

WOLF BLASS

STAGS’ LEAP

Wolf Blass Partners with
Taste London & Deliveroo
to Drive Discovery
Wolf Blass partnered with the Taste London Festival,
to drive consumer engagement, through live immersive
experiences. In November, consumers attending the
Taste of Winter in Tobacco Dock, London, were led
though an indoor sensory vineyard experience, tasting
through the Wolf Blass tiers, to discover the range and
lead them to their ultimate wine match. Following the
cancellation of the summer Taste London Festival,
Wolf Blass adapted to the challenges of COVID-19
government mandated restrictions by engaging in
a partnership with Deliveroo, offering free samples
of Yellow Label 187ml bottles to Londoners who
ordered takeaways via Deliveroo.

Stags’ Leap Winery Celebrates
125 Years with Innovative
Tastings Under Shelter in Place
The 2018 Stags’ Leap Winery vintage, marked 125
years since the winery’s first harvest. The brand
hosted journalists at the Winery, offering an immersive
weekend full of tastings, tours and iconic Napa Valley
experiences. They also had the opportunity to preview
the brand’s first ever bottling of Sauvignon Blanc.
In 2020, as the country upheld shelter in place
policies, Stags’ Leap Winery opened the doors to
its virtual tasting room for weekly Instagram and
Facebook Live tastings that mirrored traditional
guest experiences, but from the safety of home. The
virtual activation series garnered press from top-tier
media outlets such as Veranda, HGTV, Afar, Wine
Enthusiast, and Yahoo Lifestyle, to name a few.

BLOSSOM HILL

Blossom Hill Gin Fizz
Brings Bright Flavours
and Innovation
One of the key growing trends in the UK market
is consumer demand for products that blur category
lines. The launch of Blossom Hill Gin Fizz added over
£2.5m of value to the category in its first nine months
of sale. The range was so successful that new can
formats were launched which have seen listings in
major retailers and initial sales success – just in time
for the British summer.

19 CRIMES

19 Crimes Partners
with Icon Snoop Dogg
19 Crimes, the first winery that
used augmented reality to bring
wine labels to life, continues to
disrupt the market announcing
a multi-year partnership with
entertainment icon, Snoop Dogg.
The partnership launches
19 Crimes first California
wine, appropriately named the
‘Snoop Cali Red’. The line
expansion casts a contemporary
lens on 19 Crimes – a line of wines
inspired by the convicts turned
colonists that built Australia. 19
Crimes was announced as #4 in
Drinks International’s ‘The World’s
Most Admired Wine Brands 2020
and, for the fifth consecutive year,
19 Crimes was awarded Shanken’s
Impact Hot Brand. It is currently
the Number 1 Australian wine
brand in the US above $8.

8 | TREASURY WINE ESTATES ANNUAL REPORT 2020

BEAULIEU VINEYARD

Beaulieu Vineyard Celebrates
80th Anniversary with Bespoke
Riedel Partnership.
To mark the 80th anniversary of BV’s Georges de
Latour, a bespoke glass created by the legendary Georg
Riedel was released. The design features a wide bowl
and a tapered, narrow rim that allows aromas to focus
at the top of the glass, while the richness of the wine
is showcased on the palate. Trevor Durling, Beaulieu
Vineyards General Manager and Senior Winemaker,
describes it as a ‘decanter on a stem’. The 2016 vintage,
released in August 2019, is a blend of 97% Cabernet
and 3% Petit Verdot, matured for 22 months in French
Oak and garnering 97 points from respected wine
publication, Robert Parker’s Wine Advocate.

WOLF BLASS

PENFOLDS

Wolf Blass Showcases Asian
Food and Wine Pairing with
Michelin Guide Partnership
Eight out of ten Southeast Asians do not believe that
wine compliments their meals. This insight led to
a strategic partnership between Wolf Blass and the
Michelin Guide. The resulting campaign aimed to
debunk this myth by pairing Wolf Blass with iconic
local recipes created by Michelin-starred chefs. Media,
trade partners and consumers were encouraged to
experiment and ‘Find Your Flavour’, pairing Wolf
Blass with flavoursome sauces typical of the region’s
cuisine. The campaign reached more than 20 million
consumers. Keeping momentum despite COVID-19
restrictions, diners were converted to a delivery
service where ‘lockdown’ recipes and take-out tips
were created to elevate at home dining experiences.

Penfolds Koonunga Hill
Encourages Chinese Consumers
to Share the Extraordinary
To drive greater awareness and purchase intent for
Penfolds Koonunga Hill with Chinese consumers,
Penfolds launched a campaign featuring a destination
travel experience at a scenic resort atop Mogan
Mountain in Southern China. The campaign saw
a select group of influencers create digital content
showcasing themselves enjoying personal time
relaxing and socializing with friends over glasses
of red and white wines from the Koonunga Hill range.
The aspirational and locally relevant social media
content also supported retail promotions for the
purchase of six-bottle cases of Koonunga Hill to drink
and share with friends.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 9

OPERATING AND FINANCIAL REVIEW

Treasury Wine Estates (TWE) is one of the
world’s largest wine companies, listed on the
Australian Securities Exchange (ASX). The
Company is focused on delivering shareholder
value through the production of wine, and
marketing and selling quality wine brands
to consumers around the world.

The following Operating and Financial Review
contains details of the significant changes in TWE’s
state of affairs that occurred during the year ended
30 June 2020.

In fiscal 2020, the Middle East and Africa region was
transitioned from the Asia segment to the Europe
segment and the regional financial data was restated
from 1H20 to reflect this transition.

TWE’S BUSINESS ACTIVITIES

TWE’s business activities in fiscal 2020
remained unchanged.

TWE is a vertically integrated wine business focused
on portfolio premiumisation supported by innovation,
brand building investment and global sales and
marketing execution.

TWE’s brand portfolio is represented across the
Luxury, Masstige and Commercial1 price segments
and sold in more than 70 countries around the
world. Furthermore, TWE operates a balanced
and sustainable sourcing model by diversifying its
sourcing regions across Australia, the United States,
New Zealand, Italy, France and other regions.

TWE employs approximately 3,000 winemakers,
viticulturists, sales, distribution and support staff
across the globe.

TWE’S ORGANISATIONAL STRUCTURE
AND SIGNIFICANT CHANGES IN THE STATE
OF AFFAIRS

TWE is focused on four regional segments:

• Australia and New Zealand (ANZ)

• Europe, Middle East and Africa (EMEA)

• Asia

• Americas

During the year, Chief Executive Officer Michael
Clarke announced his retirement and Chief Operating
Officer Tim Ford was appointed to the Chief
Executive Officer role (effective 1 July 2020).

TWE also made a series of management changes:

• Ben Dollard was appointed President Americas,
based in Oakland (effective 13 January 2020).

• Kirsten Gray was appointed Chief Corporate

Services Officer and Company Secretary, based
in Melbourne (effective 23 March 2020).

• Stuart Boxer was appointed Chief Strategy and

Corporate Development Officer, based in Melbourne
(effective 1 June 2020).

• Tom King (previously Managing Director North
Asia) was appointed Managing Director Asia,
based in Shanghai (effective 1 July 2020).

• Kerrin Petty (previously Senior Vice President

Supply Chain Services Americas) was promoted
to Director Global Supply Chain, currently based
in Napa Valley (effective 1 July 2020).

These appointments continue to reflect the flexibility
and breadth of TWE’s global talent pool at the
executive leadership level.

1. TWE participates in three price segments; Luxury (A$20+), Masstige (A$10-A$20) and Commercial (A$5-A$10). Segment price points

are retail shelf price.

10 | TREASURY WINE ESTATES ANNUAL REPORT 2020

During the year TWE undertook a detailed review of
its portfolio and an assessment of the optimal strategy
and structure of the business. Key outcomes of this
review included the intention to consider a separate
focus for the Penfolds business which may include
a demerger into a separate listed entity and
accelerated reduction of the scale of the commercial
wine business, particularly in the United States.

Evaluation of these initiatives were progressed
in F20 and remain underway in F21. With respect
to Penfolds, work completed to date continues to
validate the expectation that value will be created
through a separate focus for both Penfolds and
TWE’s other brands, globally, with TWE to explore
the future operating model that best supports long-
term growth and value creation.

Other than the above strategic initiatives and those
matters referred to in both the ‘TWE Vision and
Strategy’ section of the Operating and Financial
Review and the Financial Statements in this Annual
Report, there have been no other significant changes
in the state of affairs of the Group during the
financial year.

TWE’S BUSINESS MODEL

TWE is a vertically integrated wine business with
three principal activities:

• Grape growing and sourcing

• Wine production

• Wine marketing, sales and distribution.

Grape growing and sourcing
TWE secures access to grapes and bulk wine from
a range of sources including Company-owned and
leased vineyards, grower vineyards and the bulk wine
market. The Company’s sourcing mix varies by region
as shown in Figure 1.

Figure 1: TWE’s regional sourcing model

Australia

24%

48%

California

24%

16%

New Zealand

31%

67%

Italy

28%

France

30%

TWE owned/leased
Grower contracts
Third party produced wine

28%

60%

63%

70%

Proactively taking steps to de-risk TWE’s global
sourcing model by embedding flexibility and
diversification across geographic regions, varietals
and price segments continues to be a driver of the
Company’s sourcing strategy.

By embedding a diversified sourcing model as well as
focusing on multi-region and multi-country sourcing,
TWE is better able to manage vintage variation as
well as grape and bulk wine pricing through periods
of grape shortages and surpluses.

This diversification and flexibility also enables
TWE to react to changes in consumer and
customer preferences.

TWE owns and leases 9,174 planted hectares of
vineyards in Australia and New Zealand and is the
custodian of some of the most sought after viticultural
assets in renowned winemaking regions, including
the Barossa Valley and the Coonawarra in Australia,
and Marlborough in New Zealand.

The Company also owns and/or operates 3,213
planted hectares in key viticultural regions in
California, including Napa Valley, Sonoma County,
Lake County and Central Coast.

TWE continues to optimise its inventory holdings
to support portfolio premiumisation and at the
same time pursue initiatives to reduce production
costs across the luxury, masstige and commercial
segments, globally.

Organisational focus on optimising production costs
across TWE’s global business continues and future
incremental savings are expected to be delivered
in the ordinary course of business.

At the same time, TWE continues to focus on securing
increased access to luxury and masstige fruit across
all its sourcing regions via vineyard acquisitions,
vineyard leasing, entering into supply contracts with
third party growers as well as increasing its sourcing
of commercial grade wine from the bulk wine market.

Wine Production
TWE owns world-class wine production and
packaging facilities:

• In Australia, TWE owns and operates eight

wineries and two packaging facilities. TWE’s
wines are primarily produced in South Australia
and Victoria;

• In New Zealand, TWE owns one winery located

in the Marlborough;

• In the US, TWE has seven wineries and one

packaging facility located in the North and Central
Coast regions of California;

• In Europe, TWE owns one winery in Italy and one

winery in France.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 11

Marketing, selling and distribution of TWE wine
TWE markets, sells and distributes its branded wine to a range of customers in more than 70 countries
around the world, tailoring and optimising its route-to-market model by country to capitalise on regional
insights and opportunities.

TWE generates its revenues and profits from the production, marketing and sale of its portfolios of branded wine.

The Company seeks to embed balance across its regional earnings mix, sourcing models and earnings delivery.

TWE’s profitability is increasingly being driven by high-growth segments, being luxury and masstige, as well
as improved profitability across all segments (including the commercial segment).

Figure 2 shows the net sales revenue (NSR) and earnings before interest, tax, SGARA and material items
(EBITS) contribution by region in F20.

Figure 2: TWE’s business performance by region in F20

Net sales revenue ($M)

EBITS contribution2 ($M)

ANZ 22%
Americas 41%
EMEA 14%
Asia 23%

ANZ 23%
Americas 26%
EMEA 9%
Asia 42%

GLOBAL INDUSTRY OVERVIEW

Global wine production and consumption
Global wine production decreased by 11.5% in 2019, driven by bad weather conditions in the main EU producing
countries of Italy, France and Spain.

Consumption remained broadly in line with the prior year with increased consumption in the United States,
the world’s largest consumer, offset by decreases in France and mainland China.

Figure 3: Global wine production and consumption3

a
h
m

11.0

10.0

9.0

8.0

7.0

6.0

1979

Global vineyard area
Global wine production (RHS)
Global wine consumption* (RHS)

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

4,500

4,000

3,500

3,000

2,500

2,000

s
e
s
a
c

e
L
9
m

* Consumption figures include ~330m 9L cases of wine used in the production of fortifieds & industrial applications

2. Excludes corporate costs of $42.5 million.
3. International Organisation of Vine and Wine (OIV).

12 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)

While total wine consumption is forecast to decline in some markets due to a flat to declining commercial segment,
consumer demand remains strong at the masstige and luxury price points and this is expected to continue.

Figure 4: Forecast five-year compound annual growth rate (CAGR) in wine consumption in key growth
areas and markets4

COUNTRY

China
New Zealand
Canada
Australia
Japan
US
United Kingdom

CAGR (2019 – 2023F)

3.3%
0.7%
0.2%
0.6%
0.1%
(0.2)%
(1.3)%

Figure 5: Value growth by price point

United States of America5

United Kingdom6

>$20

19%

10%

$8–$20

$4–$8

-3%

£8+

£6–£8

<£6

-2%

-4%

15%

12%

Mkt MAT to June 20

Mkt MAT to June 19

Mkt MAT to June 20

Mkt MAT to June 19

Australia7

Value growth of Australian bottled wine
exports (freight on board) to China8

>$20

$10–$20

<$10

-4%

>$20

22%

17%

-13%

$10–$20

<$10

-12%

-7%

45%

Mkt MAT to June 20

Mkt MAT to June 19

Mkt MAT to June 20

Mkt MAT to June 19

4. IWSR 2020. Still, sparkling and fortified wine. Value growth. China and Japan imported wine only.
5. IRI Market Advantage, Table $4+, Still bottled wine only, MAT to 28 June 2020.
6. Nielsen (750mL bottled still wine only) MAT to 13 June 2020.
7. Aztec Sales Data | Off-premise Channel Only (scan measured market) | Bottled and canned wine only | Weighted MAT to 21 June 2020.
8. Wine Australia MAT to June 2020.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 13

TWE VISION AND STRATEGY

TWE’s strategic vision and strategic imperatives have been refreshed and are set out in Figure 6:

TWE Ambition To be the world’s most admired premium wine company

Figure 6: TWE’s vision and strategy

TWE Way We boldly lead change in the world of wine

TWE Game PLAN

OUR PLAN ON A PAGE

Consumer focused
premium brand
portfolio

Multi-regional
& multi-channel
sales models

World class talent

Sustainable &

multi-regional

sourcing &

winemaking

Deep, long-term

partnerships

& networks

TWE Ambition To be the world’s most admired premium wine company

TWE

TWE Way We boldly lead change in the world of wine

We bring our whole self

We are courageous

We deliver together

TWE Game PLAN

OUR PLAN ON A PAGE

Consumer focused
premium brand
portfolio

Multi-regional
& multi-channel
sales models

World class talent

Sustainable &
multi-regional
sourcing &
winemaking

Deep, long-term
partnerships
& networks

TWE

We bring our whole self

We are courageous

We deliver together

14 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)STRATEGIC
IMPERATIVE

Consumer
focused
premium
brand
portfolio

PROGRESS AGAINST INITIATIVE IN F20

In F20, TWE brand portfolio highlights included the following:
• Activities continued to support the transformation of Penfolds from fine wine brand to become a true global

luxury brand.
– Penfolds 175th anniversary celebrations continued in 1H20, with special events and new wine releases.
– Release of a limited addition 60th anniversary ‘Year of the Rat’ Bin 389 magnum.

• 19 Crimes continued to disrupt the market announcing a multi-year partnership with Snoop Dogg and launching

19 Crimes first ever Californian wine, Snoop Cali Red.

• Successful new product launches to meet ever-changing needs of consumers and occasions including Squealing
Pig Rosé Gin, Blossom Hill Gin Fizz and the expansion of Pepperjack to produce four new outstanding wines.

• Stags’ Leap Winery celebrated 125 years with virtual weekly live tastings during shutdown.

Multi
regional
and multi-
channel
sales
models

In F20, TWE achieved the following:
• Expanded portfolio distribution and availability in priority markets in Asia.
• TWE achieved significant value and share growth in e-commerce, particularly in China.
• Implementation of new sales operating model and organisation structure in the US.
• Strengthened category leadership position in Australia.

World class
talent

In F20, TWE achieved the following:

– Driving a diverse, inclusive and collaborative culture through various initiatives, including evolving our

TWEforSHE program to be a gender equality program; continuing ELT sponsorship for high potential/high
performing women, and participation of 1200 women in ‘She Leads’ capability sessions delivered globally; and
achieving our women in senior leadership target of 40% by 2025.

– In response to COVID-19, TWE instigated a global survey to canvas employee sentiment and feedback

on ways we could further respond to and support our teams through the pandemic. We had a participation rate
of 62% globally and our overall company confidence rating was 87% positive on the actions the company had
taken to manage our business and teams over this period.

• Growing our capability, now and for the future, by building the capability of our people managers through

the creation and launch of ‘MPAT’ (Managing People @ Treasury) a comprehensive learning platform for all
people leaders; launching ‘TWEforME’ initiatives focused on supporting employee resilience through targeted
activities and resources aligned to mental health; physical health; life skills and development.

• Continuing to operate an efficient and sustainable structure through implementation of a new operating model
in ANZ and the Americas aligned to TWE’s premiumisation strategy which included a shift in organisational
structure and resourcing aimed at driving growth in our luxury and masstige categories, while retaining
a profitable commercial business.

Sustainable
& multi-
regional
sourcing and
winemaking
models

In F20, TWE achieved the following:
• A global refresh of our Health and Safety Management Standards and our Destination Zero Harm program

to include newly established personal commitments to health and safety.

• The establishment of a global critical risk control program which will deliver minimum standard controls

for the highest risk activities in our business.

• Rapid and thorough response to COVID-19 that kept our people safe and supported, our supply chain operating

and our customers served in all regions.

• Invested in luxury winemaking capacity in Australia and France to support the next phase of the

premiumisation journey.

• Continued a relentless focus on cost, resetting our efforts on specific and significant strategic opportunities across

the full value chain globally.

• Completed the implementation of a new operating model and organisation structure in the US business aligned

with the future volume and profitability objectives of the business, including progression towards
the medium-term 25% EBITS margin target for the Americas region.

• Established a new ‘Future Fit program’ to ensure we remain competitively strong in a changing marketplace,

encompassing a range of key focus areas.

• Establishment of the COVID-19 plan ahead agenda, focused on managing the business through the current

environment and identifying opportunities to further strengthen the business into the future.

Deep,
long-term
partnerships
and networks

In F20, TWE achieved the following:
• TWE returned as the Official Wine Supplier for the Australian Open 2020, serving up a stellar selection

of wines from across our Australian portfolio.

• TWE and Seppelt once again partnered with the Victoria Racing Club during the Melbourne Cup Carnival

as part of their longstanding partnership; which includes naming rights of Seppelt Wines Stakes Day.
• TWE and Wolf Blass continued their affiliation with world sport with continued successful sponsorship

of the Cricket World Cup.

• Stronger direct relationships with US retailers and distribution partners driving increased distribution

and availability of TWE’s brand portfolio.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 15

FUTURE PROSPECTS

TWE remains focused on leveraging its organisational,
strategic and physical assets across the world to drive
continued value accretion for its shareholders. Areas
of current and ongoing business focus that will likely
impact TWE’s future operational and financial
prospects include the following:

• Managing the existing TWE business through
the COVID-19 impacted trading environment
and ensuring the successful execution of the US
business restructure.

• Ongoing monitoring of developments as they relate

to pressure on international free trade, in particular
as a result of geopolitical tensions.

• Ongoing focus on premiumising TWE’s portfolio,

supported by TWE’s non-current inventory
of luxury and masstige wine.

• Right sizing of TWE’s commercial wine business
globally, but particularly in the United States.

• Exploring the potential to unlock value through a

separate focus between Penfolds and the remainder
of the global brand portfolio.

• Driving distribution and availability of luxury and
masstige portfolios, focused on Asia, United States
and ANZ.

• Investments in French production assets and

Australian luxury winemaking capacity to support
the next phase of the premiumisation journey.

• Acceleration in DTC and e-commerce channels,

both TWE’s and retail partners.

• Ongoing focus on generating new revenue streams
for TWE’s brand portfolio and selectively pursuing
potential opportunities for category adjacencies for
some brands.

• Maintaining financial metrics that are consistent
with an investment grade credit profile. TWE’s
capital structure and balance sheet provides the
Company with the flexibility to manage through
the short to medium term impacts of the COVID-19
pandemic and pursue value accretive opportunities
for shareholders into the future.

MATERIAL BUSINESS RISKS

There are various risks that could have a material impact on the achievement of TWE’s strategies and future
prospects. Below are those risks that TWE considers of greatest materiality to the business, and existing
mitigations against these risks.

Whilst our material risks have not fundamentally changed in FY20, the following risks have elevated in focus:

• Protectionism and political uncertainty heightened during FY20, elevating the risk of operating

in a changing geopolitical environment and changing laws and regulations;

• The unknown length or depth of the COVID-19 health and economic crisis, and the impact on social

restrictions and the global economy, elevating the risk of changing consumer preferences/market trends; and

• The COVID-19 crisis and the impact on workplace restrictions has the potential to disrupt our ability

to produce and distribute wine globally, elevating the risk of significant business disruption.

RISK

DESCRIPTION

MITIGATION

Climate

The impacts of climate change may lead to adverse
effects on business operations and performance.
Restrictions on access to and/or an increase in
the cost of water and energy, and the inability of
third-party suppliers to adapt to and mitigate against
climate change, could impact on TWE’s ability to
effectively source grapes and wine for production.
In addition, governmental actions to reduce the
impacts of climate change, for example packaging
waste and emission reduction targets may also impact
TWE’s cost base.

• Innovation investment, including collaboration with

research institutes on climate change adaptation and water
efficiency research, development and extension projects.

• Environment Policy and Standard, monitoring and

reporting systems.

• Strategic climate change remediation investment plan

and vineyard capital investment plan.

• Innovative agronomic practices including investment in
innovative technologies that use less water in vineyard,
winery and packaging, such as drought resistant root
stocks, and use of technology at key vineyards to monitor
soil moisture and visualise water stress.

• Sustainable Futures program to drive best practice across

all regions and gain consistent measurement of, and
reduction targets for, water and energy.

• Global Packaging Guidelines to support our ambitions
on sustainable packaging and set our expectations
of our suppliers.

16 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)RISK

DESCRIPTION

MITIGATION

Constrained
grape supply

TWE’s ability to fulfil demand, in particular growing
demand for luxury wine, is restricted by the
availability of grapes. Climate change, agricultural
and other factors, such as disease, pests, extreme
weather conditions, water scarcity, biodiversity loss
and competing land use could impact the quality
and quantity of grapes available to TWE for the
production of wine. As a result, the financial
prospects of operations could be adversely affected,
both in the year of harvest and in future periods.

• Long-term vintage planning and ongoing demand

planning processes.

• Strategic climate change remediation investment plan

and vineyard capital investment plan.

• Defined programs to progressively reduce cost of goods

sold over the next five years.

• Balanced grape intake between owned/leased vineyards

and third-party suppliers.

• Multi-regional growing and sourcing.
• Innovative agronomic practices.
• Strong grower relationships and defined service

level agreements.

• Strategically aligned and targeted learning and

development programs.

• Strategic Workforce Planning.
• Talent review and succession planning processes.
• Employee safety (including health, wellbeing and

resilience) program.

• Incentive and reward programs aligned to the achievement
of TWE’s financial and business goals and demonstration
of the right behaviours.

• Market competitive remuneration and benefits offering.

TWE’s ability to deliver on strategic targets is reliant
on attracting and retaining experienced, skilled
and motivated talent in core functions such
as winemaking, sales and marketing.
It also requires strong, resilient and effective leaders
as the business grows at pace.
Inability to retain key talent can impact relationships
with TWE’s key partners, result in lost business
knowledge, increase risk of employee burnout and
hamper the business’ ability to deliver on key initiatives.

Loss of key
leadership/
talent

Brand
reputation/
damage

The strength of TWE’s portfolio of brands is key
to the success of the business. As a brand-led
organisation, managing the reputation of brands,
and mitigating the potential damage to brands from
internal and external activity including counterfeited
product, black market trade, inaccurate media
coverage, unsatisfactory supplier performance,
product quality issues, etc. is critical to TWE’s
ongoing success.
Failure to protect and effectively manage TWE’s
portfolio of brands could have significant reputational
and financial repercussions.

• Brand portfolio and product strategy, including portfolio
rationalisation, prioritisation and targeted investment
in consumer marketing.

• Consumer insights and innovation team supporting
the monitoring and awareness of brand health and
consumer trends.

• Product pricing strategy and global pricing alignment.
• Code of Conduct, Responsible Marketing Guidelines,
Responsible Consumption program, Responsible
Procurement Code, Environment Policy and Standard,
Media Policy and Social Media Policy and incident
management procedures.

Partner
performance
and market
concentration

TWE relies on a number of key partners (suppliers,
distributors and retailers) to support delivery of key
strategic initiatives. The suboptimal performance
of these partners, and/or their market concentration
and power, could have a significant impact on TWE’s
ability to deliver these initiatives.

• Corporate responsibility program.
• Global media monitoring (including social/digital media).
• Brand and intellectual property protection strategies.

• Multi-regional and diversified supplier, distributor and

retailer base.

• Defined and pre-approved terms of engagement.
• Investment in strong and multifaceted key

partner relationships.

• Joint business planning processes to support and align

internal and partner incentives.
• Quarterly performance reviews.

Changing
laws &
regulations

TWE operates in a highly regulated industry in many
of the markets in which it makes and sells wine. Each
of these markets have differing regulations that
govern many aspects of TWE’s operations, including
taxation, production, manufacturing, pricing,
marketing, advertising, distribution and sale of wine.
Remaining compliant with and abreast of additional
regulations and changes to existing regulations
requires diligent and ongoing monitoring
by the business.

• Company-wide policies, standards and procedures.
• TWE compliance framework.
• Specialised and experienced resources and teams.
• Executive Leadership Team oversight via the Risk,

Compliance and Governance Committee.

• TWE risk and assurance framework, including targeted

reviews by external and internal audit and other
specialist providers.

• Relationships and engagement (where relevant) with key
government, industry advocacy and regulatory bodies.

Changing
Geopolitical
environment

International free trade is under pressure in the
markets we operate and sell our products.
Government actions which influence or restrict
international trade, including increasing duties
and tariffs could significantly impact the nature
of operations and reduce the demand for our products
in these markets.

• We respect local laws wherever we operate and have

implemented robust trade compliance procedures and controls.

• Relationships and engagement (where relevant) with key
government, industry advocacy and regulatory bodies.

• Flexible supply chain practices.
• Crisis management and business continuity plans.
• Seek opportunities for strategic investment from, and into
key markets to capture new growth opportunities and
enhance connection to key markets.

• Continue to grow our diversified portfolio of products

and markets including Australia, US, Europe, Middle East
and Asia.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 17

RISK

DESCRIPTION

MITIGATION

Significant
business
disruption
and/or
catastrophic
damage or
loss

TWE’s scope of operations exposes it to a number
of business disruption risks, such as environmental
catastrophes, natural and man-made hazards and
incidents, or politically motivated violence.
Significant business disruption could result in TWE
sites or employees being harmed or threatened, loss
of key infrastructure, inability to trade, inventory
shortages, excess or loss, customer dissatisfaction,
or financial and reputational loss.

Foreign
exchange
rate impacts

Information
security/
cyber/fraud
threat

TWE is exposed to foreign exchange risk from
a number of sources, namely from the export
of Australian produced wine to key offshore
markets in North America and Europe. Foreign
exchange rate movements impact TWE’s earnings
on a transactional and translational basis.

Data/information security is essential to protect
business critical intellectual property and privacy
of data. Continuing advances in technology, systems
and communication channels mean increasing
amounts of private and confidential data are now
stored electronically. This, together with increasing
cyber-crime, heightens the need for robust data
security measures.

Infrastructure
supporting
growth

The business relies on IT infrastructure, systems
and processes to support ongoing business growth.
Where such infrastructure cannot efficiently support
the changing needs of the business, there is risk
of process inefficiency and/or error, which includes
increased costs and processing times or damage
to business reputation.

Changing
consumer
preferences/
market
trends

The business’ ability to effectively manage current
and non-current inventory is intrinsically linked
to actual and forecast consumer demand – particularly
given the long product lead-time and agricultural
nature of the business.
Unanticipated changes in consumer demand or
preferences can have adverse effects on the business’
ability to either capture growth opportunities or
manage supply.

• Crisis, business continuity and disaster recovery

plans, training and resources.

• Dedicated health and safety team oversight, audit

programs and training.

• Preventative repair and maintenance program.
• Multi-regional sourcing and production capability.
• Multi-regional sales diversification.
• Comprehensive insurance program.
• Global business planning processes.
• Financial risk management (refer to Page 101).

• Active foreign exchange hedging strategy.
• Partial natural hedges (purchases and sales within the

same currency) where possible.

• Matched debt funding of assets by currency, where possible.

• Information Security Policy, supporting framework and

specialised resources.

• Restricted and segregated management of sensitive

business/supplier/customer data.

• Periodic employee training and alerts to ensure secure

handling of sensitive data.

• Crisis, business continuity and disaster recovery plans.
• Periodic user access and general system penetration testing.
• Defined cyber security strategy and governance.
• Program to monitor and detect cyber threats across the

enterprise network.

• Vulnerability management program to identify and
remediate susceptible high-risk areas within the
enterprise environment.

• Defined and Executive Leadership Team approved IT

roadmap and strategy.

• A global enterprise resource planning system and

reporting capability.

• IT policies and supporting procedures (security, change

management, project management, etc.).

• Documentation and mapping of key processes and controls

across the business.

• Semi-annual key control self-assessment process.

• Dedicated consumer insights and innovation team tracking

consumer trends and researching new opportunities.
• Brand portfolio and product strategy, including portfolio
rationalisation, prioritisation and targeted investment
in consumer marketing.

• Global business planning processes, including portfolio

reviews and global volume alignment processes.

• Strategic focus on premium (high demand) categories.

18 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)PROFIT REPORT

Financial Performance1

$Am (UNLESS OTHERWISE STATED)

F20

F19

CHANGE

F19

CHANGE

REPORTED CURRENCY

CONSTANT CURRENCY

Net sales revenue

NSR per case ($)

Other Revenue
Cost of goods sold

Cost of goods sold per case ($)

Gross profit

Gross profit margin (% of NSR)

Cost of doing business

Cost of doing business margin (% of NSR)

EBITS (before material items)
EBITS margin (%)
SGARA
EBIT (before material items)
Net finance costs
Tax expense
Net profit after tax (before material items)
Material items (after tax)
Net profit after tax
Reported EPS (A¢)
Net profit after tax (before material items
and SGARA)
EPS (before material items and SGARA) (A¢)
Average no. of shares (m)
Dividend (A¢)

2,649.5
81.88
28.7
(1,588.9)
49.10
1,089.3
41.1%
(555.8)
21.0%
533.5
20.1%
(41.3)
492.2
(85.9)
(119.3)
287.0
(26.2)
260.8
36.2

315.8
43.9
719.9
28.0

2,831.6
79.77
51.4
(1,642.5)
46.27
1,240.5
43.8%
(559.5)
19.8%
681.0
24.1%
(19.7)
661.3
(85.7)
(167.1)
408.5
–
408.5
56.9

422.8
58.9
718.4
38.0

(6.4)%
2.6 %
(44.2)%
3.3 %
(6.1)%
(12.2)%
(2.7)ppts
0.7 %
(1.2)ppts
(21.7)%
(4.0)ppts
(109.6)%
(25.6)%
(0.2)%
28.6 %
(29.7)%
–
(36.2)%
(36.4)%

(25.3)%
(25.5)%
–
(26.3)%

2,920.3
82.27
51.8
(1,696.4)
47.79
1,275.7
43.7%
(573.7)
19.6%
702.0
24.0%
(20.2)
681.8
(89.1)
(166.9)
425.8
–
425.8
59.3

440.6
61.3
718.4
38.0

(9.3)%
(0.5)%
(44.6)%
6.3 %
(2.7)%
(14.6)%
(2.6)ppts
3.1%
(1.4)ppts
(24.0)%
(3.9)ppts
(104.5)%
(27.8)%
3.6 %
28.5 %
(32.6)%
–
(38.8)%
(39.0)%

(28.3)%
(28.4)%
–
(26.3)%

Business headlines
• TWE’s diversified global business model, brand

portfolio and organisational capability supported
the delivery of profitability and strong cash flow
performance throughout F20, despite significant
disruption from the onset of the COVID-19 pandemic.

• In Asia, and in particular China, TWE continues
to see positive signs of both consumption and sales
depletion recovery. While recent trends are positive,
TWE remains cautious on the short to medium term
outlook with gatherings and social occasions, which
drive consumption of luxury wine, yet to fully
recover to previous levels.

• In the Americas, ANZ and EMEA regions, retail

channels experienced high volume and value growth
through F20. TWE’s solid performance within retail
reflects the strength of its collaborative, long-term
customer partnerships and the power of its compelling
brand propositions.

• Outside of retail, key channels including on-premise,
cellar doors and global travel retail were closed for
a significant proportion of the second half of F20,
some of which have been progressively re-opening.
TWE’s sales through these channels are weighted
towards higher margin, luxury wine and generally
have a lower cost of doing business (CODB) than
retail channels.

• TWE has commenced key initiatives to deliver

a future state premium wine business in the US,
including implementation of key operating model
and organisational structure changes in addition
to the potential divestiture of selected wine brands
and assets.

• TWE has also commenced a restructure of its

global supply chain, which is focused on driving
optimisation and efficiency to significantly reduce
future production costs.

1. Prior year comparatives have been restated for AASB 16 Leases and AASB 112 Income Taxes, as disclosed in note 32 of the Financial Statements.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 19

Financial headlines2,3
• Group volume and Net Sales Revenue (NSR) declined
by 8.8% and 9.3% respectively, reflecting the impact
of COVID-19 disruptions to key sales channels along
with challenging conditions in the US wine market
which persisted into the second half of F20.

• NSR per case declined 0.5%, driven by ongoing

challenging conditions in the US driving
incremental levels of promotions. In other markets,
NSR per case improved driven by continued portfolio
premiumisation with the luxury and masstige
portfolios now contributing 71% of global NSR
(up from 69% in F19).

• Cost of Goods Sold (COGS) per case increased

2.7%, reflecting higher COGS on Australian sourced
commercial wine and US sourced luxury wine,
partially offset by lower COGS on Australian
sourced luxury wine.

• Cost of Doing Business (CODB) improved 3.1%,
with proactive cost management of discretionary
expenditure in the second half of F20, including
no payment of discretionary incentives in respect
of F20.

• Earnings before Interest, Tax and Self Generating

and Regenerating Assets (EBITS) of $533.5 million,
down 21.7% on a reported currency basis and 24.0%
on a constant currency basis.

• EBITS margin declined 3.9ppts to 20.1%, with

higher COGS per case of 2.7% a key driver.

• Net Profit after Tax (NPAT) and Earnings per

Share (EPS) (before material items and SGARA)
declined 28.3% and 28.4% respectively.

• Strong cash conversion of 94.7%, with lower Q4
sales and a smaller Australian vintage offset by
higher levels of inventory for luxury wine; cash
conversion excluding the net change in non-current
luxury and masstige inventory was 97.6%.

• TWE’s strong, flexible balance sheet and investment

grade capital structure retained, with net debt/
EBITDAS of 2.2x, up from 1.8x in F19 due to lower
EBITS and interest cover of 10.1x. Total liquidity
was approximately $1.4 billion, comprising cash
on hand of $449.1 million and undrawn committed
debt facilities of $920.2 million.

Dividend
• Final dividend of 8 cents per share, fully franked;
full year dividend of 28 cents per share delivering
a pay-out ratio of 64%.4

Revenue by region5

REPORTED
CURRENCY

CONSTANT
CURRENCY

A$m

F20

F19

Net Sales Revenue
1,069.4
Americas
617.1
Asia
370.6
EMEA
ANZ
592.4
Total sales
revenue
Other
revenue
Total
Revenue

28.7

1,134.4
721.4
373.5
602.3

(5.7)%
(14.5)%
(0.8)%
(1.6)%

1,209.6
723.4
384.9
602.4

(11.6)%
(14.7)%
(3.7)%
(1.7)%

2,649.5 2,831.6

(6.4)% 2,920.3

(9.3)%

51.4

(44.2)%

51.8

(44.6)%

2,678.2 2,883.0

(7.1)% 2,972.1

(9.9)%

Revenue
• NSR decreased 9.3% in F20 impacted by COVID-19
disruptions in key sales channels for higher margin,
luxury wine and consumer trading down in some
markets.

• Other revenue declined by 44.6%, largely due
to discontinuation of third-party packaging
arrangements in Australia.

Cost of Goods Sold (COGS)

• COGS per case increased 2.7% due to portfolio

premiumisation and higher COGS on Australian
sourced commercial wine and US sourced
luxury wine, which increased 6.5% and 14.0%
respectively, offset by lower COGS on Australian
sourced luxury wine.

• Included in COGS are $19.8 million of increased

inventory provisions (F19: $3.2 million), primarily
in relation to the Americas due to the challenging
market conditions.

Cost of Doing Business (CODB)

• CODB improved 3.1% to $555.8 million, driven

largely by cost reduction initiatives in F20 including
proactive management of discretionary expenditure,
particularly the reduction in discretionary
employee incentives.

• Included in CODB are $42.4 million of gains on sale
of assets, $10.0 million charge associated with asset
write downs, and $10.1 million charge related to
restructuring activities associated with the Simplify
for Growth Program. These items primarily relate
to the Americas.

• CODB margin increased 1.4ppts due to lower NSR.

2. Financial information in this report is based on unaudited financial statements. Non-IFRS measures have not been subject to audit

or review. The non-IFRS measures are used internally by Management to assess the operational performance of the business and make
decisions on the allocation of resources.

3. Unless otherwise stated, all percentage or dollar movements from prior periods contained in the Profit report are pre-material items

on a constant currency basis and are subject to rounding.

4. TWE targets a dividend payout ratio of between 55%-70% of Net Profit After Tax (pre-material items and SGARA) over a fiscal year.
5. Prior year comparatives include the reclassification of $27.5 million F19 NSR for the Middle East & Africa region, from Asia to EMEA.

20 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)Corporate costs

Material items

• Corporate costs reduced by 24.9% to $42.5 million

due to a reduction in overheads following establishment
of the Global Business Services platform and the
reduction in discretionary employee incentives in F20.

• Post-tax material items of $26.2 million reflect costs
pertaining to the long-term investment in luxury
winemaking infrastructure in South Australia and
one-off overhead restructuring costs in the US.

• TWE received $0.5 million in government support
payments in Asia and the Americas, the majority
of which has been donated to local causes. TWE has
not received, nor filed an application for, Job Keeper
support in Australia.

EBITS by region6

REPORTED
CURRENCY

CONSTANT
CURRENCY

A$m

F20

F19

147.3
243.7
51.7
133.3
(42.5)

233.4
283.0
63.3
158.0
(56.7)

(36.9)%
(13.9)%
(18.3)%
(15.6)%
25.0%

262.1
274.5
68.7
153.3
(56.6)

(43.8)%
(11.2)%
(24.7)%
(13.0)%
24.9%

533.5

681.0 (21.7)%

702.0 (24.0)%

Americas
Asia
EMEA
ANZ
Corporate
TWE
EBITS

EBITS

• EBITS of $533.5 million, down 21.7% on a reported

basis and 24.0% on a constant currency basis,
principally driven by the second half of F20
decline of 51.8%.

• EBITS margin declined 3.9ppts to 20.1%; TWE
continues to target delivery of the 25% Group
EBITS margin.

SGARA

• SGARA loss of $41.3 million ($21.1 million higher
than pcp) driven by losses on the Australian 2020
vintage and the Californian 2019 vintage, partially
offset by the unwinding of prior vintage losses.
The significant reduction in tonnage and yield from
the Australian 2020 vintage resulted in a SGARA
loss of $37.2 million.

Net finance costs

• Net finance costs were favourable in F20, with

the benefits of lower interest rates and improved
financing costs partially offset by increased expense
on higher average borrowings, including leases.

Tax expense

• Lower tax expense reflects the decrease in earnings

in F20.

• Effective tax rate in F20 of 29.4% is broadly in line

with the pcp.

Net profit after tax (NPAT)

• NPAT before material items and SGARA

$315.8 million, down 28.3%, driven by lower EBITS.

Earnings Per Share (EPS)

• EPS (before material items and SGARA) decreased
28.4% to 43.9 cps. Reported basic EPS decreased
39.0% to 36.2 cps, with the difference due principally
to material items recognised in relation to the
long-term investment in luxury winemaking
infrastructure in South Australia and one-off
overhead restructuring costs in the US.

Balance Sheet (condensed)7,8

A$m

F20

F19

Cash & cash equivalents
Receivables
Current inventories
Non-current inventories
Property, plant & equipment
Right of use lease assets
Agricultural assets
Intangibles
Tax assets
Assets held for sale
Other assets
Total assets

Payables
Interest bearing debt
Lease liabilities
Tax liabilities
Provisions
Other liabilities

Total liabilities

Net assets

449.1
554.1
1,017.4
1,059.2
1,397.4
517.0
34.1
1,331.6
183.5
74.3
54.2
6,671.9

682.1
1,227.0
698.6
357.1
59.2
24.5

401.8
662.0
1,001.7
1,045.6
1,369.9
535.9
29.4
1,308.9
187.0
78.3
21.0
6,641.5

718.6
1,090.0
704.6
430.1
48.0
8.7

3,048.5

3,000.0

3,623.4

3,641.5

Balance sheet movements as at 30 June 2020

Net assets decreased $18.1 million to
$3,623.4 million. Adjusting for movements
in foreign exchange rate movements, net assets
decreased by $41.2 million.

6. Prior year comparatives have been restated for AASB 16 Leases and AASB 112 Income Taxes, as disclosed in note 32 of the Financial
Statements and includes the reclassification of $11.5 million F19 EBITS for the Middle East & Africa region, from Asia to EMEA.
7. Unless otherwise stated, balance sheet percentage or dollar movements from the previous period are on a reported currency basis.
8. Prior year comparatives have been restated for AASB 16 Leases and AASB 112 Income taxes, as disclosed in note 32 of the Financial Statements

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 21

Working Capital

Intangibles

Working capital declined $42.2 million to
$1,948.5 million, reflecting the impact of lower
sales on receivables, offset by the lower payables
balance as a result of lower volumes and the higher
inventory balance which increased by $29.3 million
to $2,076.6 million.

• The total inventory position reflects:

– Higher average vintage costs for the 2020

Australian and 2019 Californian vintages,
the latter a result of improved mix.

– Lower total inventory volume, which declined 9%,
driven by the 2020 Australian vintage that was
down approximately 30% versus the prior year –
partially offset by the carry forward of unsold
wine previously allocated to the second half of F20.

• Luxury inventory increased by 8% to $1,305.6 million:

– Higher average cost per case for the 2020

Australian and 2019 Californian vintages
a key driver.

Adjusting for foreign currency movements, intangible
assets increased by $14.1 million, principally
reflecting investment in IT systems supporting
enhancement of planning and e-commerce systems,
offset by amortisation expense.

Provisions

Provisions increased $11.2 million, driven by one-off
costs associated with the expansion of luxury
winemaking infrastructure in South Australia.

Tax and other assets

Net tax liabilities declined in F20 due to the lower
current year tax expense.

Assets held for sale

Assets held for sale relate primarily to surplus supply
assets in the US.

Net Borrowings9
Net Borrowings, including lease liabilities per AASB 16,
increased $54.1 million to $1,434.8 million comprising:

– The 2020 Australian vintage was a smaller volume

• Cash which increased $47.3 million to $449.1 million.

vintage for TWE with luxury intake down
approximately 45% and driving a 5% decline
in total luxury inventory volume.

– TWE’s flexible luxury wine allocation program
is a key strength. TWE has put in place actions
and plans to carry forward unsold wine previously
allocated to F20 in addition to the reallocation
of luxury wine that had been previously allocated
to F21 and beyond into future years.

Property, Plant & Equipment

Property, Plant & Equipment increased $27.5 million
to $1,397.4 million reflecting investment in production
assets in the Bordeaux region of France, investment
in luxury winemaking infrastructure in South
Australia, in addition to vineyard investments in
Australia, offset by depreciation and the disposal
of surplus supply assets in the US.

• Interest bearing borrowings which increased

$137.0 million to $1,227.0 million, principally the
result of higher bilateral facility drawings in F20.

• Lease liabilities which decreased $6.0 million

to $698.6 million.

Balance sheet leverage

Net debt/EBITDAS 2.2x and interest cover 10.1x.

Funding structure

At 30 June 2020, TWE had committed debt facilities
totalling approximately $2,111.3 million, comprising:

• Drawn bank facilities of $609.2 million and

$581.9 million of US Private Placement notes.

• Undrawn committed, bilateral debt facilities

totalling $629.2 million.

• Undrawn committed, term funding facility

Right of use lease assets

$291.0 million.

Right of use lease assets decreased by $18.9 million
to $517.0 million, reflecting depreciation and partially
offset by the net impact of new leases and increases
to rent.

Agricultural assets

Agricultural assets represent the market value of
unharvested grapes prior to the 2020 US vintage.

The weighted average term to maturity of committed
facilities was 3.5 years at 30 June 2020.

9. Borrowings have been reduced $41.7 million (F19: $12.1 million decrease) to reflect fair value hedges on a portion of US Private

Placement notes.

22 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)Cash flow – reconciliation of net debt10

Capital expenditure

A$m (UNLESS OTHERWISE STATED)

F20

F19

EBITDAS
Change in working capital
Other items
Net operating cash flows before
financing costs, tax & material items
Cash conversion
Payments for capital expenditure
and subsidiaries
Proceeds from sale of assets
Cash flows after net capital
expenditure, before financing costs,
tax & material items
Net interest paid
Tax paid
Cash flows before dividends &
material items
Dividends/distributions paid
Cash flows after dividends before
material items
Material item cash flows
On-market share purchases

Total cash flows from activities
(before debt)
Net (repayment)/proceeds from borrowings
Total cash flows from activities

697.9
(22.2)
(15.0)

660.7
94.7%

842.9
(167.5)
(14.7)

660.7
78.4%

(188.8)
100.2

(160.7)
102.5

572.1
(84.1)
(168.0)

320.0
(276.3)

43.7
(19.8)
(4.9)

19.0
28.8
47.8

602.5
(84.8)
(112.5)

405.2
(244.7)

160.5
(1.5)
(16.6)

142.4
169.1
311.5

Opening net debt
Total cash flows from activities (above)
Net lease liability additions
Net debt acquired
Debt revaluation and foreign
exchange movements

Increase in net debt

Closing net debt

(1,380.0)
19.0
(41.3)
(4.9)

(1,336.9)
142.4
(117.8)
–

(27.0)

(54.2)

(67.7)

(43.1)

(1,434.2)

(1,380.0)

Movement in net debt
Net debt increased $54.2 million to $1,434.2 million.
Drivers of the movement in net debt included:

EBITDAS

EBITDAS decreased $145.0 million on a reported
currency basis, driven by earnings decline resulting
from COVID-19 impacts in key markets and
challenging conditions in the US wine market.

Movement in working capital11
Net working capital outflow of $22.2 million is driven
by a decrease in payables associated with lower
production volume and the increase in inventory,
partially offset by lower receivables due to reduced
sales across all regions.

Other items

Other items reflects movements in provisions and the
profit on sale of surplus supply assets in the US.

Capital expenditure (capex) of $188.8 million comprising:

• Maintenance & Replacement capex of $82.6 million.

• Growth capex including investment in South

Australian luxury winemaking infrastructure,
vineyard acquisitions and IT investments
of $106.2 million.

In F21, capex is expected to be up to $200 million,
including maintenance and replacement expenditure
and continued business investment to support future
premiumisation and growth.

Proceeds from sale of assets

Reflects receipts from the sale of surplus supply
assets, notably vineyards in the US.

Net interest paid

Net interest paid is favourable by $0.7 million with
benefits of lower interest rates, improved financing
costs and higher investment balances partially offset
by higher average net borrowings, including leases.

Dividends paid

Increase in dividends paid reflects payment of the F20
interim and F19 final dividends, both 20 cents per
share, representing an increase of 12.9% relative to pcp.

In F20, TWE paid dividends totalling $276.3 million
and retained positive cash flow.

Tax paid

Increase in tax paid predominantly reflects higher
tax payable on the higher earnings in F19.

On-market share purchases

Reduction in on-market share purchases reflects
vesting of shares under TWE’s Long Term Incentive
Plans being delivered in F20 via a combination of new
shares issued and shares purchased on market.

Net lease liability additions

Additions of $41.3 million primarily reflects a lease
extension for the South Australian distribution centre
and new office leases, offset by lease liability payments.

Exchange rate impact

Lower period-end exchange rates used to revalue
foreign currency borrowings and cash as at
30 June 2020 increased net debt by $27.0 million.

Cash conversion

Cash conversion was 94.7%, with lower Q4 sales and
a smaller Australian vintage offset by higher levels
of inventory for luxury wine, cash conversion excluding
the net change in non-current luxury and masstige
inventory was 97.6%.

10. Unless otherwise stated, cash flow percentage or dollar movements from the previous period are on a reported currency basis.
11. Change in working capital reflects operating cash flow movements.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 23

REGIONAL SUMMARIES
ASIA

Financial performance12

Historical EBITS and EBITS margin

REPORTED
CURRENCY

CONSTANT
CURRENCY

A$m

F20

F19

721.4
617.1
NSR
167.58
187.78
NSR per case
283.0 (13.9)%
243.7
EBITS
EBITS margin (%) 39.5% 39.2% 0.3ppts

(14.7)%
723.4
11.7%
12.1% 168.04
(11.2)%
274.5
37.9% 1.6ppts

(14.5)%

F20 luxury and masstige contribution to NSR

89%

3ppts in F20

A$m

350.0

300.0

250.0

200.0

150.0

100.0

50.0

0.0

FY EBITS
Margin

40.0%

37.0%

34.0%

31.0%

28.0%

25.0%

22.0%

19.0%

16.0%

13.0%

10.0%

F16

F17

F18 F19 F20

Business performance
• Volume and NSR declined 23.7% and 14.7%

respectively, driven by decline in shipments in the
second half of F20 with all key regions and price
points impacted by COVID-19.

• In China, depletions were up 13% in Q4 versus the
pcp, including approximately 40% in June, after
having been down by more than 50% in February
and March.

• In South East Asia, strong volume and NSR

performance in the first half of F20 supported
the delivery of 8% EBITS growth in F20.

• NSR per case increased 11.7% on the pcp due
to luxury driven portfolio premiumisation.

• COGS per case was in line with the prior year, with
higher COGS on Australian sourced commercial
and masstige wine from the 2019 vintage offset
by lower COGS on Australian luxury vintages.

• CODB improved 4.4%, with reduction in

discretionary spend a key driver.

• F20 EBITS declined 11.2% to $243.7 million and

• TWE continues to see early positive signs of

both consumption and sales depletion recovery
throughout the region, but remains cautious on
the short to medium term outlook. Gatherings and
social occasions, which drive consumption of luxury
wine, are yet to fully recover to previous levels.

• TWE will continue to monitor consumption trends

to ensure shipments to customers are appropriately
calibrated to depletions. Forecast forward days
of inventory cover at the end of June are lower
versus pcp.

• Key priority brands including Penfolds, Wolf Blass,

Maison de Grand Esprit and Rawson’s Retreat
grew depletions and made significant market share
gains in F20.

• TWE achieved significant value and share growth

in e-commerce, particularly in China, with consumers
having increasingly shifted their buying behaviour
to this channel in recent months. While the broader
e-commerce channel was oriented to lower price
points, TWE’s e-commerce sales reflect a premium
portfolio mix.

EBITS margin increased 1.6ppts to 39.5%.

• Organisational focus on expanding portfolio

Asian regional perspectives
• The fundamentals of the Asian wine market remain
positive, with consumption of luxury and masstige
wine expected to continue growing over the long-term.

• COVID-19 significantly impacted luxury wine

consumption in the second half of F20 as a result
of channel closures and restrictions on gatherings
and social occasions.

distribution and availability has supported growth
in priority markets throughout F20.

• While TWE continues to monitor the global

geopolitical environment, it will remain focused on
building brands, investing in the market, engaging
with its partners and ensuring compliance.

• TWE targets EBITS margin in the high 30% range.

12. Prior year comparatives have been restated for AASB 16 Leases, as disclosed in note 32 of the Financial Statements, and includes the

reclassification of $11.5 million F19 EBITS for the Middle East & Africa region, from Asia to EMEA.

24 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)REGIONAL SUMMARIES
AMERICAS

Financial performance13

Historical EBITS and EBITS margin

REPORTED
CURRENCY

CONSTANT
CURRENCY

A$m

F20

F19

1,069.4 1,134.4
NSR
80.87
6.4%
86.06
NSR per case
233.4 (36.9)%
147.3
EBITS
EBITS margin (%) 13.8% 20.6% (6.8)ppts

(11.6)%
(5.7)% 1,209.6
86.24
(0.2)%
262.1 (43.8)%
21.7% (7.9)ppts

F20 luxury and masstige contribution to NSR

71%

4ppts in F20

A$m

240.0

210.0

180.0

150.0

120.0

90.0

60.0

30.0

0.0

FY EBITS
Margin

20.0%

17.5%

15.0%

12.5%

10.0%

7.5%

5.0%

2.5%

0.0%

F16

F17

F18 F19 F20

Business performance
• Volume and NSR declined by 11.4% and 11.6%

respectively, with declines in the US, Canada and
Latin America.

• In the US, shipments were below depletions

by 7%, driven by industry-wide working capital
management by distributors in response to the
closure of key non-retail channels as a result
COVID-19.

• NSR per case was in line with the prior year, which
resulted from the closure of key channels for higher
margin, luxury wine and impacted overall portfolio
mix in the period.

• COGS per case increased 9%, driven by higher costs

associated with US luxury wine releases in F20
and Australian sourced commercial wine, as well
as increased inventory provisions.

• CODB was in line with the prior year, with overhead
reductions offset by increased levels of promotional
investment. CODB includes gains on sale of surplus
vineyard assets, offset by asset writedowns and
other restructuring charges associated with
Simplify for Growth initiatives.

• Regional EBITS declined 43.8% to $147.3 million,
and EBITS margin was 7.9ppts lower to 13.8%.

Americas regional perspectives
• The fundamentals of the US wine market

remain attractive, with premiumisation trends
remaining intact.

• Americas regional performance reflected the

persistence of challenging US wine market conditions
and the impact of COVID-19 on TWE’s key sales
channels outside of retail and e-commerce, which

were significantly disrupted through the period.
Increased levels of supply in the market continued
to contribute to accelerated movement of product
through private label, which grew over 50% in the
$8-15 price points through the second half of F20.

• Retail channels in the US exhibited strong growth,
with continued premiumisation driving 20%+ value
and volume growth across luxury and masstige
price points.14

• TWE’s priority brand portfolio is performing

strongly with depletions up 32% in the 13 weeks
to 28 June 2020. Stags’ Leap, Beringer Brothers,
The Stag, Matua and 19 Crimes consistently
outpaced the market throughout the year.15

• As consumers moved to trusted brands in the second

half of F20, TWE shifted brand investment to
support the e-commerce channel and saw strong
growth from TWE’s own branded websites, partially
offsetting the adverse impacts from COVID-19
elsewhere in the direct to consumer channel.

• TWE has commenced initiatives to deliver a future
state wine business in the US. Key actions to date
include the implementation of a new sales operating
model and organisation structure, which will deliver
annualised cost savings of $35 million commencing
in F21.

• Upon completion of these initiatives, TWE expects
to have in place a stronger platform for growth
in the Americas, in addition to an improved shape
of P&L reflecting progression towards the 25%
medium-term regional EBITS margin target.

13. Prior year comparatives have been restated for AASB 16 Leases, as disclosed in note 32 of the Financial Statements.
14. IRI Market Advantage, Multi-Liquor Outlet + Convenience, 26 weeks ending 28 June.
15. IRI Market Advantage, Multi-Liquor Outlet + Convenience, 13 weeks ending 28 June.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 25

REGIONAL SUMMARIES
AUSTRALIA & NEW ZEALAND (ANZ)

Financial performance16

Historical EBITS and EBITS margin

REPORTED
CURRENCY

CONSTANT
CURRENCY

A$m

F20

F19

(1.6)%
592.4
NSR
0.3%
76.12
NSR per case
(15.6)%
133.3
EBITS
EBITS margin (%) 22.5% 26.2% (3.7)ppts

602.3
75.89
158.0

(1.7)%
602.4
75.90
0.3%
153.3 (13.0)%
25.4% (2.9)ppts

F20 luxury and masstige contribution to NSR

75%

2ppts in F20

A$m

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

FY EBITS
Margin

26.0%
24.0%
22.0%
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%

F16

F17

F18 F19 F20

Business performance
• Volume and NSR declined 1.9% and 1.7%
respectively in F20, with positive volume
momentum in the masstige portfolio through F20.

ANZ regional perspectives
• Over the long-term, TWE expects Australian wine
market volume and value growth to continue being
driven by the luxury and masstige price points.

• NSR per case was broadly in line with the prior
year, but declined in the second half of F20 as
consumers traded down, with TWE’s upper end
luxury portfolio most significantly impacted during
the period.

• COGS per case increased 4.3% due to higher COGS
on Australian sourced commercial and masstige
wine from the 2019 vintage.

• F20 EBITS declined 13.0% to $133.3 million, and
F20 EBITS margin declined 2.9 ppts to 22.5%.

• The impact of COVID-19 has seen changes

in consumer behaviour, with strong retail and
e-commerce channel performance more than offset
by the impacts from the closure of other key sales
channels including on-premise, cellar doors and global
travel retail. Consumers have increasingly sought
well-known and trusted brands during this period.

• Current market growth is centred in the $10-20
price points, where TWE is growing ahead of the
market led by focus brands including Squealing Pig,
19 Crimes and The Stag. 19 Crimes and Squealing
Pig were the number one and number four brands
respectively for absolute value growth in the market
during F20.17

• The luxury segment has also been in growth,

however this has been focused on the sub $50 price
points, which had an adverse impact on TWE’s
high-end luxury portfolio performance in retail
channels through the period.

• Cost impacts from the smaller volume, higher cost
2020 vintage will lead to higher commercial and
masstige COGS in F21.

• TWE continues to aspire to a 25% value share in

ANZ through prioritising growth across the luxury
and masstige portfolios; 21% value share in F20.18

16. Prior year comparatives have been restated for AASB 16 Leases, as disclosed in note 32 of the Financial Statements.
17. Aztec sales value data, bottle and canned wine only, Australia Liquor weighted, quarter & FY to 21 June 2020.
18. Aztec sales value data, bottle and canned wine only, Australia liquor weighted, MAT to 7 June 2020.

26 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)REGIONAL SUMMARIES
EMEA

Financial performanc19

Historical EBITS and EBITS margin

REPORTED
CURRENCY

CONSTANT
CURRENCY

A$m

F20

F19

(0.8)%
370.6
NSR
3.3%
41.81
NSR per case
(18.3)%
51.7
EBITS
EBITS margin (%) 14.0% 16.9% (2.9)ppts

373.5
40.47
63.3

(3.7)%
384.9
41.70
0.3%
68.7 (24.7)%
17.8% (3.8)ppts

F20 luxury and masstige contribution to NSR

35%

3ppts in F20

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

F16 F17 F18 F19 F20

FY EBITS
Margin

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Business performance
• Volume and NSR declined 4.0% and 3.7% respectively

with declines in Continental Europe and Middle
East & Africa due to COVID-19 closures partly
offset by strong masstige portfolio performance
through retail channels in the UK.

EMEA regional perspectives
• Despite being a predominantly Commercial market
for TWE, long term wine category value growth is
being driven by premiumisation across key EMEA
markets and TWE’s brand portfolio is well poised
to take advantage of these trends.

• NSR per case was in line with the prior year.

• During the COVID-19 impacted period the wine

• COGS per case increased 6.7%, reflecting masstige-
led mix shift and higher cost on Australian and US
sourced commercial wine.

• Favourable CODB reflects continued disciplined

approach to brand building investment and overheads.

• Regional EBITS declined 24.7%, led by lower
top-line performance in Continental Europe
and Middle East & Africa in the second half of F20.

• F20 EBITS margin declined 3.8 ppts to 14.0%.

category remains in growth across most key retail
markets in EMEA, driven by increased in-home
consumption. The UK, Nordics and Netherlands retail
markets are all in strong value and volume growth.20

• TWE’s focus brands are continuing to perform

well across key EMEA markets led by Lindeman’s,
Blossom Hill and 19 Crimes.

• E-commerce sales have also accelerated with

consumers increasingly shifting to this channel
for convenience; TWE has recently launched
its own luxury wine website in response to this
emerging trend.

• TWE targets mid-teen EBITS margin in F21, with
benefits of premiumisation and cost efficiencies to
be more than offset by impacts of higher Australian
commercial sourced COGS.

19. Prior year comparatives have been restated for AASB 16 Leases, as disclosed in Note 32 of the Financial Statements, and includes

the reclassification of $11.5 million F19 EBITS for the Middle East & Africa region, from Asia to EMEA.

20. Neilson Scantrack Total Market 52 weeks ended 23 June, Symphony AI Albert Heijn 52 week, Monopoly data 52 wks to June 20.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 27

VINTAGE UPDATE

Australia
The 2020 Australian vintage was challenging, with
climatic factors including spring frosts and extreme
heat events resulting in a total intake that was 30%
lower than the prior year. With respect to the bushfires,
TWE fully mitigated its risk exposure to smoke taint
through early identification of potentially affected
vineyards and batch ferments of suspect blocks.

The harvest delivered smaller volumes of luxury
wine, with intake down approximately 45% versus
the prior vintage. Commercial and masstige volumes
were in line with demand requirements. Despite the
challenges, the vintage will deliver wine of very high
quality with highlights including exceptional parcels
of Barossa Valley and McLaren Vale Shiraz.

TWE is well positioned through the flexibility of its
luxury wine allocation program to manage through
short term changes in demand or single vintage
variation. TWE has put in place actions and plans
to carry forward unsold wine previously allocated
to the second half of F20 in addition to luxury wine
that had been previously allocated to F21 and beyond
into future years.

California
The California growing season started dry with
limited winter rainfall. There were some regions
with isolated rain and minor frost during bloom, but
weather has been normal for this time of year. The
outlook for the next three months through vintage
is slightly warmer than long term average
temperatures across California.

Growing conditions thus far have resulted in healthy
vineyards and low disease pressure. At this stage the
consistency of the year has led to no major regional
and varietal differences, but lower winter rain may
impact crop loads in regions with limited soil water
availability, such as Central Coast. The 2020 vintage
is expected to be equivalent to or lower than vintage
2019 due to the dry winter.

New Zealand
The 2020 New Zealand vintage was strong, with overall
yields higher than 2019 and more in line with long term
averages. The 2020 vintage was the second largest
in terms of tonnes processed at the Matua Winery.

Overall quality is high, with good fruit concentration
and varietal expression. With a warm, dry season
in Marlborough the vineyards produced clean fruit
with great concentration and flavour. Marlborough
Sauvignon Blanc was a highlight with wines of high
quality across all sub-regions.

France
After a cool winter and warm spring with heavy rain
the grape growing season has been challenging in the
wider Bordeaux area, however TWE’s vineyards were
not adversely impacted by these conditions. Vintage
2020 is expected to be high quality and Industry
tonnage is expected to be above average. In the
Bordeaux and Champagne Appellation areas approved
production levels have been restricted and lowered.

28 | TREASURY WINE ESTATES ANNUAL REPORT 2020

OPERATING AND FINANCIAL REVIEW (CONTINUED)CORPORATE RESPONSIBILITY

TWE is committed to creating long term value
by being sustainable in everything it does. As the
custodian of some of the world’s leading premium
wines, we recognise the leadership role we play in
shaping a positive future for everyone who touches
our business and products. This means being
responsible in how we source and produce our
wine, and prioritising the wellbeing of our people,
communities and consumers.

TWE’s reporting on environmental, social
and governance (ESG) topics is captured in the
Company’s annual Sustainability Report, which
provides updates on performance across its four
corporate responsibility pillars – Performance,
Planet, People and Product.

OUR APPROACH TO CORPORATE
RESPONSIBILITY

TWE’s commitment to Corporate Responsibility
(CR) is expressed through the Company’s corporate
responsibility framework.

The Global CR Council, which comprises a mix of
members from the Executive Leadership Team (ELT),
including the Chief Executive Officer (CEO), and
senior representatives from regional and functional
areas of the business, governs the framework and
programs across the four CR pillars.

The framework and programs are informed by
relevant best practice initiatives and guidance
including the Global Reporting Initiative (GRI),
the United Nations (UN) Global Compact, and
the UN Sustainable Development Goals (SDGs).

TWE continues to embed its CR framework
integrating environmental, social and governance
across the business, and in doing so continues
to make strong progress against its priorities.

The Board has oversight of the Company’s key ESG
disclosures, including the Sustainability Report.

TWE’s Corporate Responsibility team reports
through to the company’s Legal and Governance
pillar as well as the Global Corporate Responsibility
Council and works across the global business to lead
and implement TWE’s sustainability efforts.

Figure 7 outlines key priorities and the progress
made to date.

TASKFORCE ON CLIMATE RELATED
FINANCIAL DISCLOSURES (TCFD)

TWE understands that as a global viticultural
business it will be exposed to both physical and
transitional climate risks.

For TWE, the critical impacts of climate change
are more frequent extreme weather events and the
long term risks resulting from climate pattern changes.

In addition, transitional risks and opportunities arise
from political, legal, technological, and market
responses to the challenges posed by climate change
and the transition to a lower carbon economy.

During F19, TWE developed a Taskforce on
Climate Related Financial Disclosures (TCFD)
roadmap that outlines how the business will meet
the recommendations of the TCFD over a multi
year timeframe.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 29

CORPORATE RESPONSIBILITY (CONTINUED)

Figure 7: TWE’s Corporate Responsibility Framework and key priorities

30 | TREASURY WINE ESTATES ANNUAL REPORT 2020

PEOPLEBRANDSMARKETSPARTNERSMODELTWE STRATEGIC IMPERATIVESSUSTAINABILITYMISSIONCR PILLARGUIDING PRINCIPLERespect and enhance the lives of our people and our communities Create quality wines that are consumed and promoted responsibly and safelyCreate long term value for TWE and everyone who touches our Company by being sustainable in everything we doAMBITIONTo be the world’s most admired premium wine companyBe transparent and hold ourselves to accountPRIORITIES•Remain a committed signatory to the United Nations (UN) Global Compact and a member of the local chapter Global Compact Network Australia •Introduced a rigorous supplier onboarding and risk assessment platform •Continued the implementation of its TCFD roadmap into business strategy, financial and risk management processes•Launched Global Packaging Standards and targets•Continued to focus on driving greater awareness across the TWE business on reducing usage of resources such as energy and water, as well as reducing emissions •Maintained Global Sustainability Certifications in NZ, Australia, US, Italy and obtained the Haute Valeur Environnementale (HVE) certification in France •Achieved 41.2% against a 40% women in leadership target and set a revised target of 50% by 2025•Launched global TWEforMe program focusing on mental health and physical health, life skills, and development•Increased the focus on safety conversations and safety awareness and continued to establish Global Destination Zero Harm commitments •Continued to advance TWE's Human Rights Roadmap•Mobilised global COVID-19 support accompanied by TWE’s first global workforce survey •Continued to promote Smart Drinking Week and developed a global awareness toolkit for TWE team. •Continued to expand innovation strategy and focused upon the launch of lower alcohol options as well as an organically certified range•Continued to showcase responsible marketing through partnership with Drinkwise at the 2019 Spring Racing Carnival Be sustainable and efficient when sourcing and producing our wineAMBITIONOur peoples’ human rights, safety and wellbeing is protected Our wines are produced, marketed and consumed responsiblyOur stakeholders believe in and trust our Company to operate sustainablyOur environmental impact is sustainable and reducing over timePRIORITY UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALSDIVERSITY AND INCLUSION

TWE is committed to upholding the International
Bill of Human Rights, the United Nation Guiding
Principles on Business and Human Rights and
Modern Slavery Acts. Our Inclusion & Diversity
strategy is underpinned by this commitment and
at TWE we believe our strength comes from our vast
and varied backgrounds, ideas, cultures, ethnicities,
talents, genders and voices: the things some see as
different, and that we see as critical to our success.

We are committed to creating an inclusive, supportive
and collaborative culture to attract and retain the best
possible talent, and create an environment where people
from diverse backgrounds can fulfil their potential.

3. Employer of Choice

Strong employer brand, employee value proposition
and improved business outcomes that demonstrate
return on investment in human capital.

The Board has committed to reviewing and
assessing progress against TWE’s diversity and
inclusion objectives annually. To that end, the
Company is pleased to report progress made in
F20, together with the F21 measurable objectives.

The Company’s Diversity and Inclusion policy can be
found on the Company’s website: www.tweglobal.com

F20 DIVERSITY TARGET AND OBJECTIVES

Recommendation 1.5 of the ASX Corporate
Governance Principles and Recommendations states
that a company’s board or board committee is to set
the measurable objectives for achieving gender
diversity. The diversity target set by the Board for
F20 was to increase female representation in
leadership roles to 40% by 2025.

The diversity objectives set by the board for F20 were:

1. Diverse workforce

Strong workforce representation so we can leverage
talent as a competitive advantage, creating value
for our customers and community.

2. Inclusive workplace

Create a differentiated inclusive culture where
diverse & resilient talent can thrive during
‘moments that matter’ to deliver business outcomes
that matter.

The CEO and all ELT members had a diversity Key
Performance Objective (KPO) to deliver the above
objectives in F20.

F20 PROGRESS ON DIVERSITY TARGET

As at 30 June 2020, TWE reached 41.2% females in
leadership¹ roles against the target of 40% by 2025.
This is up from 39% in F19.

F20 PROGRESS ON F20 DIVERSITY
OBJECTIVES:

Please note the following highlights demonstrating
the progress made against the F20 diversity
objectives, with some initiatives continuing into F21
for further expansion or embedding into the business.

Diverse Workforce
• Global and Regional I&D councils established

with regular meeting cadence to ensure traction
on initiatives and support progress.

• TWEforSHE capability and networking events

conducted globally, with over 1200 women
participating. Celebration of female leadership
through our annual Mary Penfolds Award.

• Completion of a global gender pay equity review

and associated actions.

• Commenced implementation of an artificial
intelligence (AI) based recruitment tool to
mitigate bias in candidate selection.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 31

DIVERSITY AND INCLUSION (CONTINUED)

Inclusive Workplace
• Global Pride network implemented with education

and community events globally.

• Inclusion resources, training and toolkits provided
to leaders as part of Managing People at Treasury
learning portal.

• Launched TWEforME program for all employees,

providing resources, training and activities to build
resilience and wellbeing.

Employer of Choice
• Review of key policies to ensure market

competitiveness.

• TWE influencer social media campaign launched

to amplify EVP and promote our inclusive
workplace to candidates.

The ELT continued to operate as the Diversity
Council in F20 with a focus on setting appropriate
goals and targets, monitoring progress and
driving action.

F21 OBJECTIVES AND INITIATIVES

Our Diversity and Inclusion strategy for F21
continues to be focussed on three key pillars,
which positively contribute to our employee
experience and business performance. These
objectives are underpinned by our commitment
to upholding the International Bill of Human Rights,
the United Nation Guiding Principles on Business
and Human Rights and Modern Slavery Acts.

1. Diverse workforce

Strong workforce representation so we can leverage
talent as a competitive advantage, creating value
for our customers and community.

2. Inclusive workplace

Create a differentiated inclusive culture where
diverse & resilient talent can thrive during
‘moments that matter’ to deliver business outcomes
that matter.

3. Employer of Choice

Strong Employer Brand, Employee Value
Proposition, and improved business outcomes that
demonstrate return on investment in human capital.

The Executive Leadership Team is committed to
continuing TWE’s Diversity Council with accountability
for setting the strategy and defining and managing
TWE’s diversity and inclusion goals and objectives.

Given the Company’s target to increase females in
leadership roles to 40% by 2025 has been reached
during 2020, the Company has set a new measurable
objective to increase female representation in
leadership roles to 50% by 2025 whilst continuing
to foster an inclusive culture.

The following initiatives are planned to build on
the Company’s achievements in F20 and support the
delivery of our objectives in F21, aligned with each
strategic pillars:

Diverse Workforce
Initiatives to attract, retain and progress females in
leadership to achieve increased female representation
in leadership roles, whilst continuing to broaden our
focus in line with our strategy of diversity and
inclusion beyond gender. Initiatives include:

• Attracting female and diverse talent groups:

Introducing gender balanced interview panels and
expanding the global implementation of an Artificial
Intelligence (AI) based recruitment tool (designed
to guide attraction and remove bias from selection
decisions) including monitoring of results;

• Retaining female talent: Flexible working and
lifestyle/carer’s leave; Mary Penfold Award;
Gender Pay Equity;

• Progressing female talent: female targeted

succession planning for key roles; investment
and development of female potential through
TWEforSHE learning programs and events.

Inclusive Workplace
Initiatives to foster an inclusive workplace:

• Broaden the focus of inclusion beyond gender:

undertake a global workforce survey to capture
data and further inform the strategy and actions;

• Launch a global diversity and inclusion calendar
with key dates acknowledged company wide,
e.g. International Women’s Day, Taste of
Harmony, Pride; and

• Capture metrics on the use of flexible working

across TWE’s workforce.

32 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Employer of Choice
• Focus on flexible working for a more gender

equal uptake;

• Review of all diversity and inclusion policies

regionally and globally, including establishment
of a Human Rights Charter to articulate TWE’s
commitment to human rights (including diversity
and inclusion); and

• Assessment against citations including WEGA,

Edge and AWEI.

The CEO and all ELT members have a diversity
Key Performance Objective (KPO) to deliver the
above objectives in F21.

Board Diversity Objective
The Board is committed to ensuring it is comprised
of individuals with appropriate skills, experience
and diversity to develop and support the Company’s
strategic imperatives. The Board recognises the
importance of cultural, geographic and gender
diversity amongst its members which is reflected
in the current representation on the Board, with
four non-executive directors based offshore in regions
in which the Company operates.

During F20, the Board achieved its gender target of
at least 30% female representation on the Board, with
women representing 44.4% of the board as at the date
of this report. This is up from 37.5% in F19. In F21,
the Board set itself a measurable objective that at
least 30% of its directors will be of either gender,
to maintain gender diversity in its composition.

Organisational gender profile
The Company makes the following diversity
disclosures in relation to Recommendation 1.5
of the ASX Corporate Governance Principles
and Recommendations:

RECOMMENDATION 1.5 REQUIREMENT

Proportion of women in the whole organisation
As at 30 June 2020, 39.1% of the Group’s employees were women.

Proportion of women in senior executive1 positions
within the Group
As at 30 June 2020, 39.1% of the senior executive positions
within the Group were held by women.

Proportion of women on the Board of the Company
As at 30 June 2020, 44.4% of the Company’s Board of
Directors (including executive directors) were women.
The Board is committed to ensuring that it is comprised of
individuals with appropriate skills, experience, and diversity
to develop and support the Company’s strategic aims.
The Board had set itself a target for achieving gender diversity
in its composition of at least 30% female representation, and
this was achieved during F20.
Further details are set out in the Corporate Governance
section of the Annual Report.

As an Australian based business, the Company complies with
the Workplace Gender Equality Act which requires annual
filings to the Australian Workplace Gender Equality Agency
(WGEA) disclosing ‘Gender Equality Indicators’. This report,
covering the 12-month period ending 31 March, is published
on the WGEA and the TWE websites in July 2020. It can
be found here: TWEglobal.com/careers/diversity-inclusion.

1. For the purposes of this disclosure, the Company has defined
‘senior executive’ as the Chief Executive Officer and his/her
direct reports. To note, using the TWE definition of leader,
41.2% of roles were held by women as at 30 June 2020.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 33

BOARD OF DIRECTORS

Paul Rayner
B.Ec, MAdmin, FAICD
Chairman

Member of the Board since May 2011 and
Chairman of the Board and the Nominations
Committee since September 2012.
Mr Rayner is an independent Director and
is an Australian resident.
He brings to the Board extensive international
experience in markets relevant to Treasury
Wine Estates including Europe, North America,
Asia, as well as Australia. He has worked in
the fields of finance, corporate transactions
and general management in the consumer goods,
manufacturing and resource industries. His last
role as an executive was as Finance Director of

British American Tobacco plc, based in London,
from January 2002 to 2008.
Mr Rayner is also a director of Qantas Airways
Limited (since July 2008 and where he also serves
as Chairman of the Remuneration Committee),
Boral Limited (since September 2008 and
where he also serves as Chairman of the Audit
Committee) and Murdoch Childrens Research
Institute (since December 2014 and where he
also serves as Chairman of the Audit, Finance
and Risk Committee).

Tim Ford
BBus, MBA
Managing Director and
Chief Executive Officer
from July 2020

Member of the Board since July 2020.

Mr Ford is an Australian resident.

Tim Ford is TWE’s Chief Executive Officer.

Since joining TWE in February 2011, Tim has
held key roles across the business’ global operations,
including Director, Global Supply and Managing
Director Europe, South East Asia, Middle East
and Africa, and Deputy Chief Operating Officer
with responsibilities for Asia, Europe and the
ANZ regions.

In January 2019 Tim was appointed Chief
Operating Officer with responsibility for TWE’s
global operations, and took the helm as Chief
Executive Officer on 1 July 2020.

Tim has more than 20 years’ experience in the
wine, food and beverages sectors with a strong
track record for disciplined execution of strategy,
driving growth and building high performing
and connected teams. Prior to joining TWE
he held senior management roles with National
Foods and CUB.

Michael Clarke
CA, B.Com
Managing Director and
Chief Executive Officer
to July 2020

Member of the Board from March 2014 to July 2020.
Mr Clarke has dual Irish/South African
citizenship and is an Australian resident.
He has held senior executive roles at Kraft Foods,
where he was President of the Company’s
European business and sat on the global operating
board, The Coca-Cola Company and Reebok
International. He was Chief Executive Officer
of the UK publicly listed company Premier
Foods Plc, where he led a significant turnaround
of the business.

Mr Clarke was a director of Quiksilver Inc. from
April 2013 to February 2016 and a director of
Wolseley plc from March 2011 to March 2014.

Ed Chan
B.A/Ec, MS
Non-executive Director

Member of the Board since September 2012
and member of the Audit and Risk Committee.
Mr Chan is an independent Director and a Hong
Kong resident.
He is currently a director of Hong Kong-listed
LINK REIT (since February 2016) and Yum China
Holdings, Inc (since October 2016). He is also
a Partner at Gaorong Capital (since July 2020).
Mr Chan is a former Operating Partner of
SoftBank Investment Advisers (from June 2019 to
June 2020), the former Vice Chairman of Charoen
Pokphand Group (from January 2012 to February

2018) and a former director of Hong Kong-listed
CP Lotus (from April 2012 to February 2018).
From 2006 to 2011, Mr Chan was the President
and CEO of Wal-Mart China. He has also held
senior positions with Dairy Farm including his
last position as North Asia Regional Director,
as well as leading the Bertelsmann Music
Group business in Greater China. Mr Chan
began his career as a consultant with McKinsey
& Co working in both Hong Kong and the
United States.

Louisa Cheang
B.Soc.Sc
Non-executive Director

Member of the Board since December 2018.
Ms Cheang is an independent Director and
a Hong Kong resident.
Ms Cheang is currently the Vice Chairman and
Chief Executive of Hang Seng Bank, listed on the
Stock Exchange of Hong Kong Limited, and has
had a successful career spanning a number of
critical leadership roles with the HSBC Group
throughout the Asia Pacific region. She is also
currently Group General Manager of HSBC
Holdings plc.

Ms Cheang is also a member of key government
advisory committees, notably The Twelfth
Jiangsu Provincial Committee of the Chinese
People’s Political Consultative Conference
and the Consulting Committee for the China
(Guangdong) Pilot Free Trade Zone.
Ms Cheang is a former director of The Hongkong
and Shanghai Banking Corporation (from
September 2017 to August 2020).

34 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Warwick Every-Burns
AMP, Harvard University
(Advanced Management Program)
Non-executive Director

Member of the Board since May 2011, Chairman
of the Human Resources Committee and
a member of the Nominations Committee.
Mr Every-Burns is an independent Director and
is an Australian resident.
He was Chief Executive Officer of Treasury Wine
Estates on an interim basis from 23 September
2013 until 30 March 2014.
Mr Every-Burns previously worked for more than
30 years in the consumer packaged goods sector.
Most recently, he was President of International
Business and a member of the Worldwide

Executive Committee of The Clorox Company,
a NYSE listed, S&P 500 business. He was
based at The Clorox Company’s headquarters
in the United States for more than five years.
Mr Every-Burns began his career at Unilever,
is a former Managing Director of Glad Products
of Australia and New Zealand and was formerly
on the Advisory Council of the Frontier
Strategy Group.
Mr Every-Burns is a director of The a2 Milk
Company Limited (since August 2016).

Garry Hounsell
B.Bus (Acc), FCA, FAICD
Non-executive Director

Colleen Jay
B.BA (Hons)
Non-executive Director

Antonia Korsanos
BEC, CA, GAICD
Non-executive Director

Member of the Board since September 2012,
Chairman of the Audit and Risk Committee
and member of the Nominations Committee.
Mr Hounsell is an independent Director and
is an Australian resident.
He is currently Chairman of Helloworld Travel
Limited (since October 2016) and Myer Holdings
Limited (since November 2017, and a director
since September 2017). Mr Hounsell is also a
director of the Commonwealth Superannuation
Corporation Limited (since July 2016) and Findex
Group Limited (since January 2020).

Mr Hounsell is a former Chairman of PanAust
Limited (from July 2008 to August 2015),
Spotless Group Holdings Limited (from February
2017 to August 2017, and a director from March
2014 to August 2017) and a former director of
Qantas Airways Limited (from January 2005
to February 2015), Integral Diagnostics Limited
(from October 2015 to March 2017) and Dulux
Group Limited (from July 2010 to December
2017), and has held senior positions at both
Ernst & Young and Arthur Andersen.

Member of the Board since April 2018 and a
member of the Human Resources Committee.
Ms Jay is an independent Director and a United
States resident.
Ms Jay has extensive experience in the fast-moving
consumer goods industry, acquired over a long and
successful career at Procter & Gamble (P&G,
NYSE: PG), an American multinational consumer
goods company, between 1985 and 2017. She has
held a number of senior leadership roles at P&G,
including President of Global Retail Hair Care
& Colour and her most recent position as

President of the US$5 billion Global Beauty
Specialty business, where she also led a complex
transition and divestiture of several businesses.
Ms Jay has significant global experience having
lived and worked in the United States, Europe,
China and Canada. Her leadership experience
includes significant global line operational
leadership, strategy creation and execution,
global brand building, new business development,
transformational innovation and M&A.
Ms Jay is currently an independent non-executive
director of The Cooper Companies (NYSE: COO).

Member of the Board since April 2020 and member
of the Audit and Risk Committee.
Ms Korsanos is an independent Director and
an Australian resident.
Ms Korsanos has extensive senior executive,
strategy, M&A, financial and governance
experience, acquired over a successful career as
Chief Financial Officer of ASX-listed Aristocrat
Leisure Limited between 2009 and 2018, where
she also served as Company Secretary from 2011.
During her career with Aristocrat, Ms Korsanos
gained a significant understanding of the US market
and regulatory environment, and led a number
of transformational cross-border acquisitions.

Prior to joining Aristocrat, Ms Korsanos held
senior leadership roles in the fast-moving
consumer goods industry for a period of 10 years,
including at Goodman Fielder and Kelloggs.
Ms Korsanos commenced her career with
accounting firm Coopers & Lybrand (now PwC)
and has been a Chartered Accountant since 1994.
Ms Korsanos is currently an independent director
of ASX listed companies Crown Resorts Limited
and Webjet Limited. Ms Korsanos also serves as
Chair of the Audit Committees of Crown Resorts
Limited, and Webjet Limited. Ms Korsanos is a
former director of Ardent Leisure Group Limited
(from July 2018 to June 2020).

Lauri Shanahan
JD Business Law, BS Finance
Non-executive Director

Member of the Board since November 2016 and
a member of the Human Resources Committee.
Ms Shanahan is an independent Director and
an American resident.
Ms Shanahan has extensive retail, consumer
brand, e-commerce and governance experience.
She has held senior executive positions, including
as Chief Administrative Officer, Chief Legal
Officer and Corporate Secretary with The Gap
Inc, where she was involved in leading the
company’s domestic and international expansion.

Ms Shanahan also founded the consulting practice
Maroon Peak Advisors of which she is a Principal.
Ms Shanahan is currently a director of Cedar
Fair Entertainment Company (NYSE: FUN)
and Deckers Outdoor Corporation (NYSE: DECK).

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 35

CORPORATE GOVERNANCE

The Board believes good corporate governance
and transparency in corporate reporting
is a fundamental part of the Group’s culture
and business practices.

During the year, the Board continued to govern the
Company through the execution of its strategy. Key
governance issues for the Board during the year included:

• Guiding the Company through the uncertainty created
by COVID-19 and ensuring prompt and transparent
communication with investors and stakeholders
throughout the period.

• Overseeing the orderly CEO transition from Michael

Clarke to Tim Ford.

• Continued commitment to the governance of

workplace health, safety and wellbeing performance
and developing a culture of leadership on safety across
the business.

• Providing input into, and approval of, management’s

development of corporate strategy, including oversight
of the strategic review, setting performance objectives
and approving the annual financial budget; and
monitoring corporate performance and the
implementation of strategy and policy.

• Board succession planning, including the appointment

of new independent non-executive director, Toni
Korsanos, who joined the Board on 1 April 2020.

• Supporting and monitoring changes to the Executive

Leadership Team.

• Oversight of management’s continued commitment
to a culture of high performance and ethical and
responsible conduct to lead the global business and
setting remuneration policy to attract and retain
the best possible talent and reward high performance
and conduct that exemplifies the Company’s
growth behaviours.

• Maintaining effective governance to facilitate

high-quality processes and internal controls as the
business continues to grow.

INTRODUCTION

The Board is committed to conducting the Company’s
business ethically and responsibly and in accordance
with high standards of corporate governance.
This is essential for the long-term performance
and sustainability of the Company and to protect
the interests of its stakeholders.

To this end, the Board regularly reviews the charters
and key policies that underpin the Company’s corporate
governance practices to ensure they remain appropriate,
reflect high standards of governance and meet regulatory
requirements. During the financial year, the Company’s
governance practices complied with the third edition
of the ASX Corporate Governance Principles and
Recommendations (ASX Principles and Recommendations).
The importance of effective leadership, good governance
and appropriate culture has been at the forefront of a
number of key developments across corporate Australia,
culminating in the release of the fourth edition of the
ASX Principles and Recommendations on 27 February
2019. The Company revised its governance practices
to ensure alignment with the fourth edition of the ASX
Principles and Recommendations from 1 July 2020.

This Corporate Governance section provides an overview
of the Board’s operations, details on the governance
framework and the key governance focuses of the Board
for the financial year.

The full Corporate Governance Statement, which outlines
the key aspects of the Company’s corporate governance
framework and practices for the year ended 30 June 2020,
together with the Appendix 4G Key to Disclosures –
Corporate Governance Council Principles and
Recommendations and key governance documents,
including the constitution, charters and policies,
are available on our website at www.tweglobal.com/
investors/corporate-governance.

BOARD OF DIRECTORS

Members of the Board
The Board continues to comprise a majority of independent
directors with all directors, other than the Chief Executive
Officer (CEO), being independent non-executive directors.

As at 1 July 2020, Tim Ford was appointed as the
Company’s new CEO and Managing Director
following the retirement of Michael Clarke. During
the year, Toni Korsanos was also appointed as a
non-executive director with effect from 1 April 2020.

36 | TREASURY WINE ESTATES ANNUAL REPORT 2020

The Board is committed to ensuring it is comprised of individuals with appropriate skills, experience and diversity
to develop and support the Company’s strategic aims, having regard to its strategic imperatives. The Board utilises
a skills matrix to assist in assessing the mix of skills, experience and diversity on the Board, and to identify areas
of focus to supplement the mix of skills and experience as part of Board succession planning.

The Board considers that its members collectively possess the appropriate competencies and attributes that enable
the Board to discharge its responsibilities effectively, contribute to the Company’s strategic direction and oversee
the delivery of its corporate objectives.

Areas of competence and skills of the Board of directors are summarised in Table 1 below. In respect of each
competence and skill (including health, safety and environment), either all directors or a majority of them are
considered to be either highly competent or practised.

Table 1 – F20 Areas of Competence and Skills – Board of Directors

F20 Strategic Imperatives

PEOPLE

Build a high-
performing
organisation

Directors’ Skills

AREA

Industry

Leadership
and Strategy

Finance and
Business

BRANDS

MARKETS

PARTNERS

MODEL

Transform
our portfolio

Win in priority
markets

Develop
long-term
relationships

Optimise our
capital base

COMPETENCE/EXPERIENCE

Wine, alcohol beverages, consumer and brand marketing, supply chain, distribution, route-to-market.

Listed company experience, business strategy development, business and executive leadership,
CEO experience, mergers and acquisitions.

Financial acumen, financial accounting, audit, corporate finance, capital management, e-commerce
and technology.

Governance and
Regulatory

Corporate governance, legal, regulatory, health, safety and environment, government relations,
risk management, human resources and remuneration.

International

International business experience and international industry experience.

The Board recognises the importance of cultural,
geographic and gender diversity amongst its members
which is reflected in the current representation on the
Board, with four non-executive directors based offshore
in regions in which the Company operates. The Board
considers that it also has an appropriate mix of director
tenure, with its members ranging from newly appointed
to longer standing directors. As at June 2020, the
average tenure for the Company’s non-executive
directors was 5.2 years.

In order to maintain gender diversity in the composition
of the Board, in 2019 the Board set itself a measurable
objective that at least 30% of its directors will be
of each gender going forward. Since the appointment
of Toni Korsanos with effect from 1 April 2020, women
represent 44.4% of the Board. In order to maintain
gender diversity, in 2020 the Board has set itself
a measurable objective to maintain at least 30%
of its directors being of each gender going forward.

The Board is committed to ensuring its performance
is enhanced through its director induction and ongoing
education program. The Board’s ongoing education
calendar incorporates site visits and presentations
given by management and external parties concerning
developments impacting, or likely to impact, the business.

Independence
The Board, having reviewed the position, interests
and relationships of all non-executive directors
currently in office, considers that all non-executive
directors are independent.

During the year, non-executive directors met
periodically without the presence of management
to have the opportunity to discuss key matters
amongst the non-executive directors.

Annual director elections
Under the Constitution of the Company, at least every
three years non-executive directors are required to retire
and may seek re-election. However, having regard to
the global nature of the Company, emerging governance
requirements in key markets, the inherent benefits for
Board renewal and to ensure accountability of directors,
in 2019 the Board adopted a policy pursuant to which
all non-executive directors will seek re-election annually.

Role of the Board
The responsibilities of the Board as set out in the Board
Charter include:

Strategic guidance and effective oversight of management
• Providing input into, and approval of, the Group’s
corporate strategy, performance objectives and
business plans as developed by management.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 37

CORPORATE GOVERNANCE (CONTINUED)

• Appointing the CEO and managing succession planning,

as well as overseeing changes to the Executive
Leadership Team, with a view to ensuring senior
management has the appropriate resources to enable
implementation of the Company’s strategic initiatives.

Risk assessment and management
• Reviewing and evaluating the integrity of the Group’s
systems of risk management (for both financial and
non-financial risks), legal compliance, and internal
compliance and control.

• Directing, monitoring and assessing the Group’s

performance against strategic and business plans.

• Approving and monitoring capital management,

including major capital expenditure, acquisitions
and divestments.

Obligations to stakeholders
• Monitoring and reviewing processes aimed at ensuring

integrity of financial and other reporting.

• Monitoring compliance with adopted strategies,
procedures and standards, including corporate
governance standards.

Board Committees
Three standing Board Committees have been established to assist the Board in fulfilling its responsibilities.

Board of Directors

Audit and Risk Committee

Oversees: Financial reporting, risk management and internal controls, external and internal audit, capital
management and compliance.

Key focuses for F20 included:
• Reviewing the scope of the annual internal and external

audit programs and overseeing the conduct and
coordination of those programs as well as the performance
and independence of the internal and external auditors.
• Reviewing significant accounting and financial reporting
related matters raised by management and the auditors.

• Reviewing workplace health, safety and environmental

matters across the Group.

• Reviewing whistleblower matters reported across

the Group.

• Monitoring the Group’s insurance renewal program.
• Reviewing and recommending to the Board for approval

the full year and interim financial reports.

Nominations Committee

Oversees: Board composition, performance of the Board, Board Committees and individual directors,
as well as succession planning.

Key focuses for F20 included:
• Assessing the competencies of the directors to ensure
the appropriate range of skills and expertise amongst
Board members.

• Board succession planning, including recommending

to the Board the appointment of Toni Korsanos as a new
non-executive director with effect from 1 April 2020.

• Overseeing the internally facilitated review of the

performance of individual directors, the Board as a whole
and the operation of the Board Committees.

• Assessing the independence of directors and suitability

of director candidates for re-election and election.

Human Resources Committee

Oversees: Training, development and succession planning for senior management, Company’s diversity policy,
evaluation of senior executive performance and remuneration and non-executive directors’ fees.

Key focuses for F20 included:
• Reviewing and recommending to the Board for approval
the new CEO, Tim Ford’s employment contract, fixed
remuneration and incentive compensation arrangements.

• Reviewing and approving the fixed remuneration

and incentive compensation arrangements for senior
executives, including reviewing the attainment of STI
and LTI performance conditions.

• Reviewing and recommending to the Board for

approval the Company’s F20 Remuneration Report.

• Approving the terms of engagement of the

remuneration consultant.

• Reviewing remuneration practices for F20 and F21

in light of COVID-19 impacts.

38 | TREASURY WINE ESTATES ANNUAL REPORT 2020

GOVERNANCE POLICIES

The Company has a number of governance policies which
guide how it does business, including:

• Code of Conduct, which recognises that the Company’s
reputation is one of its most valuable assets, founded
on the ethical and responsible behaviour of the people
who represent the Company;

• Disclosure Policy, which recognises the importance

of timely disclosure of the Company’s activities
to shareholders and market participants so that
trading in the Company’s shares takes place
in an informed market;

• Anti-bribery and Corruption Policy, which supports

the Company’s commitment to countering bribery and
corruption in all forms and confirms that the Company
does not tolerate any form of bribery and corruption;

• Whistleblower Policy, which promotes and supports

the Company’s culture of honest and ethical behaviour
by encouraging the reporting of suspected or actual
unethical, illegal, corrupt or fraudulent behaviour
or any other matter that may contravene the Company’s
Code of Conduct or other policies or the law;

• Potential Conflicts of Interest Policy, which guides

the disclosure and management of potential conflicts
of interest;

• Share Trading Policy, which prohibits trading in the
Company’s shares by directors and employees if they
are in possession of ‘inside information’ and provides
for trading windows during which directors and
employees may trade subject to any required approvals
being obtained; and

• Risk Management Policy, as well as a risk management
framework, which provide guidance and direction on
the management of risk in the Company and state the
Company’s commitment to the effective management
of risk (financial and non-financial) to reduce uncertainty
in the Company’s business outcomes.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 39

DIRECTORS’ REPORT

The directors of Treasury Wine Estates Limited
(the Company) present their report together with the
financial report for the Company and its controlled
entities (the Group) for the financial year ended
30 June 2020 and the auditor’s report.

The following sections of the Annual Report are
part of, and are to be read in conjunction with,
this Directors’ Report:

• Operating and Financial Review (OFR)

• Board of Directors

• Remuneration Report

PRINCIPAL ACTIVITIES

The principal activities of the Group during the
financial year were viticulture and winemaking,
and the marketing, sale and distribution of wine.

STATUTORY INFORMATION

The Group’s consolidated financial statements have been
presented for the financial year ended 30 June 2020 and
appear on pages 64 to 120.

DIRECTORS

The directors of the Company during the financial year
and up to the date of this report are:

DATE OF APPOINTMENT

Warwick Every-Burns
Paul Rayner
Ed Chan
Garry Hounsell
Michael Clarke
(Chief Executive Officer)
(Retired 1 July 2020)
Lauri Shanahan
Colleen Jay
Louisa Cheang
Antonia Korsanos
Timothy Ford
(Chief Executive Officer)

9 May 2011
9 May 2011
1 September 2012
1 September 2012

31 March 2014
1 November 2016
1 April 2018
1 December 2018
1 April 2020

1 July 2020

Particulars of the current directors’ qualifications,
experience and Board Committee responsibilities
are detailed in the Board of Directors section of this
Annual Report.

DIRECTORS’ MEETINGS

The number of Board and Board Committee meetings and the number of meetings attended by each of the directors
of the Company during the financial year are listed below:

Meetings held during 2020 financial year

BOARD
MEETINGS1

AUDIT AND RISK
COMMITTEE
MEETINGS1

HUMAN
RESOURCES
COMMITTEE

MEETINGS1

NOMINATIONS
COMMITTEE
MEETINGS1

ADDITIONAL
MEETINGS2

HELD ATTENDED HELD ATTENDED HELD ATTENDED HELD ATTENDED

ATTENDED

Paul Rayner
Michael Clarke
Ed Chan
Louisa Cheang
Warwick Every-Burns
Garry Hounsell4
Colleen Jay5
Antonia Korsanos6
Lauri Shanahan

14
14
14
14
14
14
14
2
14

14
14
133
123
133
14
14
2
133

–
–
5
–
–
5
4
1
–

–
–
–
–
6
4
2
–
6

3
–
–
–
3
3
–
–
–

17
16
8
–
1
16
–
1
–

1. Shows the number of meetings held and attended by each director during the period that the director was a member of the Board or
Committee. Directors who are not members of Board Committees do attend Committee meetings from time to time. The above table
reflects the meeting attendance of directors who are members of the relevant Committee(s).

2. Reflects the number of additional formal meetings attended during the financial year by each director, including Committee meetings

(other than Audit and Risk Committee, Human Resources Committee or Nominations Committee) where any two directors are required
to form a quorum.

3. Mr Chan, Ms Cheang, Mr Every-Burns and Ms Shanahan attended all scheduled Board meetings. This number reflects an absence from

unscheduled Board meetings due to prior commitments.

4. Mr Hounsell retired as a member of the Human Resources Committee with effect from 1 April 2020.
5. Ms Jay retired as a member of the Audit and Risk Committee and joined the Human Resources Committee with effect from 1 April 2020.
6. Ms Korsanos joined the Board and the Audit and Risk Committee with effect from 1 April 2020.

40 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Directors’ interests in share capital
The relevant interest of each director in the share
capital of the Company as at the date of this report
is disclosed in the Remuneration Report.

Company Secretary
The Chief Corporate Services Officer and Company
Secretary is Kirsten Gray BA/LLB (Hons), PDM. She
has been the Company Secretary since 23 March 2020.

Ms Gray is an experienced executive with deep
commercial, legal and governance expertise. Ms Gray
began her career as a corporate lawyer with Allens
Australia, following which she held senior global
positions in various top ASX-listed companies including
the BHP Group and Orica.

DIVIDENDS

Interim dividend: The Company paid an interim
dividend of 20 cents per ordinary share on 3 April 2020.
The dividend was fully franked.

Final dividend: Since the end of the financial year, the
directors have approved a final dividend of 8 cents per
share, fully franked and payable on 2 October 2020.

The record date for entitlement to this dividend is
3 September 2020.

In summary:

DIVIDEND PER SHARE

Interim dividend paid on
3 April 2020
Final dividend payable
on 2 October 2020
Total

20 cents

$144

8 cents

$57.70
28 cents $201.70

The Company paid shareholders a final dividend in
respect of the 2019 financial year of $143.8 million.

REVIEW AND RESULTS OF OPERATIONS

Information on the operations and financial position
for TWE is set out in the OFR accompanying this
Directors’ Report.

SIGNIFICANT CHANGES IN THE STATE
OF AFFAIRS

During the financial year the Company’s state of affairs
was significantly impacted by COVID-19 and the nature
of these impacts have been discussed in various ASX
announcements made by TWE.

Further information regarding the impact of COVID-19
on TWE can be found in the Chairman and CEO’s letter
and the OFR, each in the Company’s 2020 Annual Report.

BUSINESS STRATEGIES, PROSPECTS AND
LIKELY DEVELOPMENTS

The OFR sets out information on TWE’s business
strategies and prospects for future financial years
and refers to likely developments in the Company’s
operations and the expected results of those operations
in future financial years.

EVENTS SUBSEQUENT TO BALANCE DATE

On 18 August 2020 TWE was advised that the Chinese
Ministry of Commerce had initiated an anti-dumping
investigation into Australian wine exports into China.
TWE will co-operate with any requests for information
from Chinese or Australian authorities. Given the
uncertainty regarding the extent, timing and outcome
of the investigation, the financial impact on the Group’s
operations or financial position, if any, cannot be
reasonably estimated at this time.

Other than as disclosed in the financial statements,
the directors are not aware of any other matters or
circumstances that have arisen since the end of the
financial year which have significantly affected or may
significantly affect the operations of the Group, the
results of those operations or the state of affairs of the
Group in subsequent financial years.

CORPORATE RESPONSIBILITY

Matters of environmental and social significance to the
Group are primarily addressed within the Corporate
Responsibility (CR) framework. This framework is
governed by the Global CR Council, comprising the
Chief Executive Officer and senior representatives
from regional and functional areas of the business.

Further detail on the Group’s CR framework, initiatives
and achievements are detailed in the Corporate
Responsibility section of this Annual Report and the
Company’s most recent Sustainability Report.

ENVIRONMENTAL REGULATION

The Group is subject to various environmental laws and
regulatory frameworks governing energy, water, waste
and greenhouse gas reporting for its operations globally.

Management of environmental issues is a core element
of the work program delivered by sustainability and
technical teams and is detailed in the relevant material
business risks outlined in the OFR.

The Group recognises the direct link between effective
management of its environmental impacts and its
business success. To this end, the Group’s environment
policies, procedures and practices are designed to ensure
that the Group maintains focus on resource efficiency
and continuous improvement, and that environmental
laws and permit conditions are complied with.
Compliance with these regulatory and operational
programs has been incorporated into relevant
business practices and processes.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 41

DIRECTORS’ REPORT (CONTINUED)

The Group monitors its operations through a Health,
Safety and Environment (HSE) Management System,
overlaid with a risk management and compliance system
overseen by the Audit and Risk Committee. The Global
CR Council provides executive oversight of the Group’s
strategic approach to managing the environmental
challenges it faces. Although the Group’s various
operations involve relatively low inherent environmental
compliance risk, matters of non-compliance are identified
from time to time and are corrected. Where required,
the appropriate regulatory authority is notified.

Under the compliance system, the Audit and Risk
Committee and the Board receive six-monthly reports
detailing matters involving non-compliance and
potential non-compliance. These reports also detail
the corrective action that has been taken.

Under the National Greenhouse and Energy Reporting
Act 2007 (Cth) (NGER Act), the Company is required to
report on its Australian operations that exceed specific
greenhouse gas emissions or energy-use thresholds.
The Company submitted its annual NGER Act report
by the prescribed reporting date of 31 October 2019.

During the financial year, the Group was not found
to be in breach of any environmental regulations.

PROCEEDINGS ON BEHALF OF THE COMPANY

There are no proceedings brought or intervened in,
or applications to bring or intervene in proceedings,
on behalf of the Company by a member or other person
entitled to do so under section 237 of the Corporations
Act 2001 (Cth).

NON-AUDIT SERVICES AND AUDITOR
INDEPENDENCE

KPMG is the Company’s auditor, appointed with effect
from 23 October 2013.

The Group may decide to engage the auditor, KPMG,
on assignments additional to their statutory audit
duties where such services are not in conflict with
their role as auditor and their expertise and/or detailed
experience with the Company may allow cost efficiencies
for the work.

The Board has considered the position and, in
accordance with advice received from the Audit and Risk
Committee, is satisfied that the provision of non-audit
services by KPMG is compatible with the general
standard of independence for auditors imposed by the
Corporations Act 2001 (Cth). The Board also notes that:

• the engagements for all non-audit services have been
reviewed by the Chief Financial Officer, and where
relevant, the Chair of the Audit and Risk Committee
in accordance with the Committee’s rules of engagement
regarding the provision of non-audit services by the
External Auditor contained in the Committee Charter
to ensure they do not impact the actual or perceived
impartiality and objectivity of KPMG; and

42 | TREASURY WINE ESTATES ANNUAL REPORT 2020

• none of the services provided by KPMG

undermine the general principles relating to
auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.

During the financial year, the fees paid or payable for
non-audit services provided by KPMG and its related
practices totaled $58,882. Amounts paid or payable for
audit and non-audit services are disclosed in note 31
of the Financial Statements.

A copy of the auditor’s independence declaration is set
out on page 43 and forms part of this report.

INDEMNITIES AND INSURANCE

Rule 40 of the Company’s Constitution provides that the
Company must, to the extent permitted by and subject
to the Corporations Act 2001 (Cth), indemnify each officer,
director and Company Secretary of a Group company
in respect of any liability, loss, damage, cost or expense
incurred or suffered or to be incurred or suffered by the
officer, director or Company Secretary in or arising out
of the conduct of any activity of the relevant Group
company or the proper performance of any duty of
that officer, director or Company Secretary.

Each director of Treasury Wine Estates Limited has
entered into a Deed of Indemnity, Insurance and Access
(Deed) with the Company. No director or officer of the
Company has received a benefit under an indemnity
from the Company during the period ended 30 June 2020
or to the date of this report.

In accordance with the Company’s Constitution and
the Deed, the Company has paid a premium in respect
of an insurance contract that covers directors and
officers of the Group companies. Due to confidentiality
undertakings of the policy, no further details in respect
of the premium or the policy can be disclosed.

ROUNDING

Treasury Wine Estates Limited is a company of the
kind referred to in ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 and,
except where otherwise stated, amounts in the statutory
financial statements forming part of this report have
been rounded off to the nearest one hundred thousand
dollars or to zero where the amount is $50,000 or less.

This report is made on 25 August 2020, in accordance
with a resolution of the directors.

Paul Rayner
Chairman

Timothy Ford
Chief Executive Officer

AUDITOR’S INDEPENDENCE DECLARATION

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 43

F20 REMUNERATION REPORT (AUDITED)

CONTENTS

Executive
remuneration

45 Key messages

47 Remuneration strategy

and framework

52 Performance and

remuneration outcomes

Non-executive director
remuneration

Other remuneration
information

58 Framework and outcomes

60 Governance

61 Further information

EXECUTIVE REMUNERATION

Introduction from the Chairman of the Human Resources Committee

Dear Shareholders,

On behalf of the Board, I am pleased to present our F20
remuneration report for which we will seek your approval
at our Annual General Meeting in November 2020.
The remuneration report is designed to demonstrate the
Company’s performance, executive reward framework
and outcomes and their strong alignment with our
strategic objectives and shareholder interests.

TWE’s remuneration practices are designed to attract,
motivate and retain the high-calibre talent needed to
deliver sustainable results that out-perform the market
over the long term.

F20 was undoubtedly a challenging year for the
Company and the global economy in general, and the
remuneration outcomes for F20 reflect this.

The Board is immensely proud of the tenacity, discipline
and resilience our team has shown throughout this
period of disruption and uncertainty. Supply chain
operations continued to function in each geography, with
no material interruptions. We implemented a number
of measures to protect both our people and our business
during this time, and to comply with government
directives. In addition to safeguarding the health, safety
and wellbeing of our people, we implemented a number
of measures including providing additional sick leave
and cancelling all incentive plans to protect fixed
remuneration and maintain ongoing employment.
Stand downs have been minimal throughout this
time and occurred predominately in our cellar doors.

We have reported a 22% decline in EBITS to
$533.5 million and a reduction in lease-adjusted ROCE
from 13.9% to 10.6%. Our lease-adjusted EBITS margin
for F20 decreased from 24.1% to 20.1%, and the Company’s
Total Shareholder Return performance declined.

The Company remains profitable and our capital
structure remains strong, flexible and efficient. Our
liquidity position is also strong with approximately
$1.4bn of cash and undrawn committed debt facilities.

Unlike many industries impacted by recent events, our
business is as best placed as it can be to come out of this
and transition back to growth. We are already seeing
positive signs of recovery. While short term consumption
has been impacted due to disruptions to key channels,
the latent demand for Luxury wine is still a long-term
play that we have confidence in. We believe that trusted
and authentic brands are standing out to consumers
in the current environment. We are committed to our
Luxury allocation model and will continue to manage
our allocations to support future growth.

The remuneration outcomes for F20 reflect an
appropriate alignment between pay, TWE’s strategic
objectives and financial performance during the year
and shareholder returns. Incentive plan targets were
not met, and as many of our customers, suppliers,
communities and shareholders continue to feel
the effects of this pandemic, the Board agreed not
to exercise discretion, and therefore no payments
will be made under F20 incentive plans. We remain
confident our talent, business model and remuneration
policies and framework will return us to long-term
value creation into the future.

The Committee is responsible for oversight of other
Human Resources matters across the Group, including
diversity and inclusion, talent development and
succession, culture and engagement. It remains our
intention to encourage open dialogue with shareholders
and other stakeholders, particularly around our
remuneration practices, disclosures, and governance
matters, and accordingly I welcome any feedback and
comments you may have.

Yours sincerely,

Warwick Every-Burns
Human Resources Committee Chairman

44 | TREASURY WINE ESTATES ANNUAL REPORT 2020

1. KEY MESSAGES

This report details the F20 remuneration framework and
outcomes for the Key Management Personnel (KMP)
of the Group which includes non-executive directors. In
this report, ‘executives’ refers to executives identified as
KMP excluding the non-executive directors. It is
prepared in accordance with the requirements of the
Corporations Act 2001 and all references are to
Australian dollars (A$) unless otherwise specified.

a) Financial results for F20
F20 was a challenging year for many organisations
and Treasury Wine Estates Limited (TWE) was no
exception. With performance significantly impacted by
the COVID-19 pandemic during the second half of the
year and challenging US wine market conditions, in F20
TWE delivered EBITS1 of $533.5 million, down 22%,
and adjusted Earnings per Share (EPS) of 43.9 cents
(before material items and SGARA). EBITS margin
accretion1 was also impacted, down 4.0 percentage
points to 20.1%. Return On Capital Employed (ROCE)1
declined by 3.3 percentage points to 10.6%.

b) KMP
Executive KMP at TWE during F20 are as follows:

EXECUTIVES (AS AT 30 JUNE 2019)

Current KMP
MA Clarke
TM Ford
MJ Young

Chief Executive Officer
Chief Operating Officer
Chief Financial Officer

Full Year
Full Year
Full Year

From 1 July 2020 (F21), Michael Clarke ceased as an
Executive KMP, Tim Ford commenced as CEO,
and Stuart Boxer, Chief Strategy and Corporate
Development Officer, became Executive KMP.

c) F20 remuneration outcomes
F20 brought unprecedented challenges globally to many
organisations and industries and TWE was no exception.
Our approach to remuneration was guided by our
principles to:

• Ensure compliance with government directives;

• Minimise the impact of COVID-19 on our teams’

health, safety and wellbeing;

• Position the Company for recovery;

• Preserve ongoing roles for employees;

• Protect fixed remuneration of all employees; and

• Align our response with shareholder interests.

We made decisions that we believe were financially
prudent and to preserve the sustainability of our
business. It is still unknown how long or deep the
COVID-19 health and economic impact will be, and
we have been measured and pragmatic in our approach
to responding to, and mitigating the impacts of, this
pandemic on our business.

With the exception of the remuneration of the incoming
CEO, fixed remuneration for all executives has been
frozen for F21. As previously disclosed, Mr Ford’s fixed

1. Lease-adjusted in accordance with AASB 16 Leases

remuneration effective from his commencement as
CEO on 1 July 2020, is $1,500,000. Mr Young’s fixed
remuneration will remain at $714,000 for F21 and
Mr Boxer’s remuneration from his commencement
on 1 June 2020 is $675,000.

In addition, prior to COVID-19 impacts being fully known,
the Board made the decision to cancel all discretionary
employee incentives which related to F20 performance
outcomes. This included payments under the F20
short-term incentive plan (STIP) for executives and all
other eligible employees.

Whilst the Group has focussed on sustainable earnings,
cost management and operational effectiveness during
the pandemic, the pandemic and subsequent financial
impacts have had an impact on long-term incentive plans
(LTIP). The Group’s Total Shareholder Return (TSR)
performance was at the 40th percentile relative to its
peer group while ROCE results, impacted significantly
by the COVID-19 pandemic, were also below threshold.
Targets were not met and the Board elected not to apply
discretion to the F18 LTIP, which resulted in nil vesting
for eligible executives.

d) CEO retirement
On 21 October 2019, TWE announced Mr Clarke’s
intention to retire from the role of CEO in the first
quarter of F21 and the appointment of Tim Ford, the
current Chief Operating Officer, as the incoming CEO.
It was later agreed and announced that this transition
would occur on 1 July 2020.

In line with agreements with Mr Clarke, TWE provided
repatriation support up to a maximum of $50,000, and
deemed Mr Clarke a good leaver for the purposes of his
incentives. Upon cessation of employment, Mr Clarke’s
performance rights under the F19 and F20 LTIP were
pro-rated to reflect the performance period served up to
the date of cessation of employment. These rights remain
on foot until the end of the performance period and are
subject to the performance conditions under the plan.
As a result of the pro ration, 94,973 performance rights
pursuant to the F19 LTIP and 223,194 performance
rights pursuant to the F20 LTIP, lapsed on cessation
of employment. In addition, 100% of performance rights
granted to Mr Clarke under the F18 LTIP lapsed as the
performance hurdles were not met.

Mr Clarke was entitled to retain his Restricted Equity
granted under STIP Deferral. In accordance with the
plan rules, 34,247 restricted shares granted under the
F18 STIP Deferral and 35,419 restricted shares granted
under the F19 STIP Deferral were released from
restriction to Mr Clarke on 16 August 2020, and a
further 35,419 restricted shares granted under the
F19 STIP Deferral remain subject to dealing restrictions
with the restriction period due to end on 16 August 2021.
As outlined in section 1 c), no F20 STIP is payable to
executives, including Mr Clarke.

Upon cessation of employment, 145 and 344 matched
share rights Mr Clarke received under the 2018 and
2019 Share Cellar Plans respectively, were converted
to matched shares.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 45

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

e) Changes for F21

F21 LTIP
In the F21 LTIP, the weighting of the two metrics remain unchanged from the F20 LTIP with ROCE weighted at 75%
of the plan and Relative Total Shareholder Return (TSR) weighted at 25%.

The following targets have been set for the F21 LTIP.

ROCE growth will be measured against the adjusted F20 ROCE base of 10.6%. This adjusted base takes into account
the new Lease Accounting Standard, AASB 16 Leases, which is mandatorily effective in Australia for annual
reporting periods commencing on or after 1 January 2019 and will vest according to the following schedule.

ROCE baseline
10.6% (F20)

% points ROCE growth

ROCE result

Less than 3.0
3.0 to 3.6
3.6 to 5.1
At or above 5.1

Less than 13.6%
13.6% to 14.2%
14.2% to 15.7%
At or above 15.7%

% of Performance Rights subject
to ROCE measure which vest
0%
35-75%
75-100%
100%

The relative TSR vesting schedule for the F21 LTIP is unchanged from F20.

Relative TSR
Vesting Schedule

Relative TSR Ranking

Below 50th percentile
50th to 60th percentile
60th to 75th percentile
At or above 75th percentile

% of Performance Rights subject
to relative TSR measure which vest
0%
35-70%
70-100%
100%

The peer group for relative TSR comprises companies within the S&P/ASX 200 Index, excluding companies from the
energy, metal and mining, real estate and finance sectors.

The Board has the discretion to adjust hurdles or vesting outcomes to ensure that executives are neither penalised
nor provided with a windfall benefit arising from matters outside of Management’s control.

Offers of performance rights under the F21 LTIP are subject to the satisfaction of performance conditions, as outlined
above, over the performance period from 1 July 2020 to 30 June 2023. LTIP awards to KMP are at the absolute
discretion of the Board. For the F21 LTIP the following awards will apply:

• Mr Ford: opportunity of 175% of fixed remuneration at maximum,61.25% at threshold, 0% below threshold

• Mr Young: opportunity of 150% of fixed remuneration at maximum, 52.5% at threshold, 0% below threshold

• Mr Boxer: opportunity of 150% of fixed remuneration at maximum, 52.5% at threshold, 0% below threshold

In F21, Mr Young will receive an additional one-off LTIP grant of 50% of fixed remuneration. This one-off grant
will be subject to the same performance conditions as the F21 LTIP. Mr Young has established himself as a
high-performing CFO, who the Company seeks to retain on a performance-based mechanism.

The Company will seek shareholder approval at the 2020 Annual General Meeting for the F21 LTIP offer to the CEO.

F21 STIP
The F21 STIP will once again be based on a balanced scorecard approach; with weightings on financial, strategic
and operational objectives. The STIP metrics have been set to take performance to the next level and strengthen
alignment between incentives and strategic priorities, and create shareholder value. Given the current global economic
uncertainty, the Board will closely monitor STIP targets throughout the year to ensure the targets and payout ranges
remain appropriate. The Board is committed that there will be no STIP payments to executives if the Company does
not achieve bottom line growth.

46 | TREASURY WINE ESTATES ANNUAL REPORT 2020

2. REMUNERATION STRATEGY AND FRAMEWORK

a) Remuneration strategy
TWE’s remuneration strategy sets the direction for the remuneration framework, and drives the design and
application of remuneration programs across the Group, including for executives. The strategy aims to attract,
retain and reward the best talent while building a performance oriented culture. It sets out principles and processes
to ensure remuneration practices attract and motivate the highest calibre employees to achieve TWE’s business and
financial objectives.

The remuneration strategy is designed to drive strong alignment between financial results for the business,
wealth outcomes for shareholders and remuneration outcomes for employees. The Board believes that remuneration
of executives should include a fixed component and at-risk or performance-related components, including both
short-term and long-term incentives. Executive and stakeholder interests are aligned through share ownership.

The weighting of the at-risk remuneration components for each executive reflects the Board’s commitment to
performance-based reward. The diagram below illustrates the mix of remuneration components for executives,
firstly as a percentage of total remuneration (TR) at target, and then as a proportion of total maximum potential
remuneration. Section 3 of this report describes performance outcomes over the past five years, and how they have
impacted remuneration outcomes.

b) Total remuneration
Executive total remuneration (TR) comprises fixed remuneration (FR) and variable (‘at-risk’) remuneration in the form
of STIP and LTIP. The remuneration structure in F20 for current executives as at 30 June 2020 is as follows.

Total Remuneration with STIP at Target and LTIP at Threshold:

CEO

Executives

Percentage of TR

FR 37%
STIP (at target) 37%
LTIP (at threshold) 26%

Percentage of TR

FR 46%
STIP (at target) 30%
LTIP (at threshold) 24%

Total Remuneration with both STIP and LTIP at Maximum:

CEO

Executives

FR 22%
STIP (at maximum) 33%
LTIP (at maximum) 45%

FR 27%
STIP (at maximum) 32%
LTIP (at maximum) 41%

The remuneration structure for Mr Ford from 1 July 2020 is as follows:

Total Remuneration with STIP at Target
and LTIP at Threshold:

Total Remuneration with both STIP
and LTIP at Maximum:

CEO

FR 41%
STIP (at target) 34%
LTIP (at threshold) 25%

FR 24%
STIP (at maximum) 35%
LTIP (at maximum) 41%

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 47

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

c) Fixed remuneration
For Australian-based executives, total fixed remuneration is inclusive of superannuation and other benefits.
For executives based outside Australia, references to fixed remuneration refer to base salary.

Fixed remuneration is reviewed annually and set at a market-competitive level reflective of the executive’s skills,
experience and responsibilities, and taking into account complexity of role, location and performance. The Group
looks at industry and general market peer groups, with key criteria applied such as market capitalisation and
revenue. Both Australian and global peers are considered, reflecting the complexity of roles in a global business
and the Group’s international lens on talent. Peer groups are reviewed regularly for accuracy and alignment with
the nature of the business.

d) Short-term incentive plan (STIP)
The STIP drives an annual at-risk component of remuneration and links business results for the fiscal year,
executive performance and reward using a balanced scorecard approach.

The STIP performance measures are consistent across the Company. They are designed to support the financial
health of the organisation and shareholder return in terms of dividends and share price – this year and over time.
The metrics are aimed at reinforcing Company culture as their achievement requires compliance with the Company’s
Growth Behaviours: focus, belief, trust and collaboration. Hurdles and stretch targets are set for each metric and the
sustainability of growth and returns is non-negotiable.

F20 STIP MEASURES

REMUNERATION AND PERFORMANCE LINK

Global/Regional
EBITS
(40%)

Quality of
EBITS Growth
(15%)

The EBITS metric focuses and rewards executives for the overall health and profit-producing ability
of the Group/Region. It is designed to ensure TWE products are available in the right quantities and
retail locations and to reward executives for levels of earnings that will benefit shareholders and
provide capital that can be further invested by the Group for future growth.

This growth metric aims to reward executives for delivering sales volumes and new revenue
opportunities to drive a steep trajectory in top line growth globally. Delivery of this metric drives
executives to explore wider opportunities for the Company to grow beyond existing products,
markets, consumers and customers.

Margin accretion
and Simplify for
Growth
(15%)

Executives delivering margin accretion are rewarded for delivering growth from quality brand
contribution through premiumisation of the Company’s portfolio, optimising investment and making
risk-managed, smart decisions. The Simply for Growth metric aims to reward executives for the
efficient deployment of overheads. It encourages executives to innovate, and where warranted to
invest, to remove waste, achieve economies of scale and simplify.

Quality of Growth
(15%)

This metric rewards executives for the delivery of quality growth and strong planning operations
as measured by improvements in the balance sheet, operating cash flow and forecast accuracy, all
critical to delivering Return on Capital Employed metric (ROCE) and financial returns for investors.

Delivery on ‘I Care’
(15%)

The ‘I Care’ metric is delivered through robust business processes and outcomes, role modelling
leadership and collaboration, and through Health and Safety.

48 | TREASURY WINE ESTATES ANNUAL REPORT 2020

The table below provides further detail including the weighting of metrics and size of opportunity.

F20 STIP PERFORMANCE MEASURES

STIP OPPORTUNITY

STIP DETAIL

The annual STIP opportunity is at
the absolute discretion of the Board.
In F20, the following STIP
opportunities applied:

Target:

Executives 66.5% of FR
CEO 100% of FR

Maximum:

Executives 120% of FR
CEO 150% of FR
The Individual Performance
Multiplier is derived from
the level of each Executive’s
achievement of individual Key
Performance Objectives (KPOs)
and demonstration of the
Company’s growth behaviours.
The Individual Performance
Multiplier can drive a result
of 0 to 1.5 as per the diagram
below (except for the CEO for
whom the individual multiplier
on STIP was capped at 1.25).

An annual award of cash and/or equity
may be received based on:
• Group, team and individual financial,
strategic and operational performance,
measured by way of the Balanced
Scorecard; and

• Agreed individual key performance

objectives (including company
behaviours) measured by way of the
Individual Performance Multiplier.

One-third of the STIP award for
executives is deferred into Restricted
Equity in the Company. Of this
Restricted Equity, one-half (i.e. one-sixth
of the overall STIP award) will vest after
one year, and one-half (i.e. one-sixth of
the overall STIP award) will vest after
two years.
The remaining two-thirds of the STIP
award is delivered in cash at the end
of the F20 financial year.

The STIP Balanced Scorecard is
weighted by role.

CEO:

40% global EBITS
15% quality of EBITs growth
15% margin accretion and Simply

for Growth
15% quality of growth
15% delivery on ‘I Care’

CFO:

40% global EBITS
15% quality of EBITs growth
15% margin accretion and Simply

for Growth
15% quality of growth
15% delivery on ‘I Care’

COO:

40% global and regional EBITS
15% quality of sales volumes
15% margin accretion and supply

and overhead cost optimisation

15% quality of growth
15% delivery on ‘I Care’
Each measure is assessed after
the financial year-end against the
full-year audited financial report
on a constant currency basis to
determine the overall level of
performance achieved.
The Balanced Scorecard can drive
a multiplier outcome between 0 and
1.2 as per the diagram overleaf.

The overall structure of the F20 STIP is provided below.

STIP Award $

Fixed
remuneration $

STIP
opportunity %

Balanced
Scorecard
multiplier
(0 to 1.2)

Individual
multiplier
(0 to 1.5)*

Fixed – based on
level of skill and
responsibility.

Fixed – based on
role and level of role
within the Company.

Variable – based on
Balanced Scorecard
performance.

Variable – based
on individual
performance.

* 0 to 1.25 for the CEO

Restricted Equity
Cash

1/3
2/3

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 49

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

e) Long-term incentive plan (LTIP)
The LTIP is designed to reward executives for long-term performance and value creation for shareholders. Offers are
approved by the Board and made to select executives and senior leaders as nominated by the CEO. For F20 the Board
awarded the CEO an LTIP opportunity of 200% of fixed remuneration.

The performance period for the F20 LTIP is 1 July 2019 to 30 June 2022 and the plan has the following features.

LTIP PERFORMANCE MEASURES

LTIP OPPORTUNITY

LTIP DETAIL

Relative Total Shareholder Return (TSR)
(25% weighting)

Relative to S&P/ASX 200 Index, excluding
companies from the energy, metal and mining,
real estate and finance sectors.

Return on Capital Employed (ROCE) Growth
(75% weighting)

Calculated as EBITS divided by average capital
employed (at constant currency). Capital employed
is the sum of average net assets (excluding SGARA)
and average net debt.

LTIP awards are at the
absolute discretion of the
Board. In F20, the following
awards applied:

CEO 200% of FR
Other executives 150%
of FR

LTIP awards are delivered in the
form of performance rights. The
number of rights allocated is based
on face value using the 90-day
VWAP preceding 1 July at the
start of the performance period.
If the performance conditions are
met at the end of the three-year
performance period, rights vest
and executives receive a share
for each vested performance right.
No amount is payable on the
vesting of the performance rights
or on their conversion into shares.
Any rights that do not vest, lapse.

F20 LTIP Vesting schedules

Relative TSR
Vesting Schedule

Relative TSR Ranking

Below 50th percentile
50th to 60th percentile
60th to 75th percentile
At or above 75th percentile

% of Performance Rights
subject to relative TSR
measure which vest
0%
35–70%
70–100%
100%

ROCE baseline
13.8% (F19)

% ROCE growth

ROCE result

Less than 1.0%
1.0% to 1.9%
At or above 1.9%

Less than 14.8%
14.8% to 15.7%
At or above 15.7%

% of Performance Rights
subject to ROCE measure
which vest
0%
35–100%
100%

f) General employee share plan (Share Cellar)
The Group has a broad-based employee share plan, Share Cellar, which operates by way of after-tax employee payroll
contributions (minimum $500 to maximum $5,000) to acquire shares in the Company. An equivalent cash plan
operates in countries where, due to local laws, it is not practicable to offer shares to employees.

In the plans operating from 2015 to 2018, for every two purchased shares that a participant holds at the vesting date
(approximately two years) the Company delivered one matched share (i.e. one to two matching), subject to continued
employment. This design feature was enhanced in the 2019 Share Cellar Plan. For employees enrolling in the plan
from 2019 onwards, the Company delivers one matched share for every purchased share held at the plan vesting date
(i.e. one to one matching), subject to continued employment.

Shares were acquired in F20 under the 2019 Share Cellar offer, and a subsequent offer to participate in the 2020
Share Cellar Plan was made during the year. The first share purchases in the 2020 Share Cellar Plan will occur
in September 2020 (F21).

g) Mid-term incentive plan (MTIP) and restricted equity plan (REP)
In addition to the LTIP, the Group operates the MTIP and REP which allows the Board to make offers of Deferred
Share Rights or Restricted Shares for the purpose of attracting, retaining and motivating key employees within the
Group. Participation in the MTIP is open to senior managers (excluding executives eligible for LTIP) and is subject
to performance conditions. There were no awards granted to, or vested for, executives under the MTIP or REP in F20.

50 | TREASURY WINE ESTATES ANNUAL REPORT 2020

h) Other key information

Board discretion and clawback
The Board will exercise discretion to ensure any cash or equity outcomes are appropriately aligned to the Company’s
underlying performance and the interests of shareholders. The Board maintains the discretion to clawback any vested
or unvested equity should a clawback event arise, which was not apparent at the time the equity was awarded. This
may include (but not limited to) material misstatement of financial results, material reputational damage to the
Group, or where there was serious misconduct by a participant. This includes discretion to reduce, forfeit or reinstate
awards, require payback of proceeds from the sale of vested awards and/or reset or alter the performance conditions
applying to any award.

Leavers
The Board has absolute discretion as to whether participants retain their unvested equity upon ceasing employment,
taking into account the circumstances of their departure. In general if an executive ceases employment with the
Group they forfeit their entitlement to cash or equity under the Company’s incentive plans.

In exceptional circumstances (such as redundancy, death or disability), the Board, in its discretion, may determine
that a portion of the award is retained having regard to performance and time lapsed to date of cessation (or that an
equivalent cash payment be made). Retained awards will generally be subject to post-employment vesting, where the
participant must continue to hold the relevant Performance Rights until the end of the performance period, and be
subject to the performance conditions under the plan.

Dividends and voting rights
Plan participants granted restricted shares are entitled to dividends and voting rights. Participants holding
time-restricted rights or performance rights are entitled to neither dividends nor voting rights.

Change of control
In the event of a change of control, unless the Board determines otherwise, the transfer restrictions imposed on the
shares will be lifted, but only in so far as to permit the executive to participate in the change of control event. Any
shares that do not participate in the change of control event will continue to be subject to restrictions until the end
of the applicable restriction period.

Hedging
To ensure the variable components of the Group’s remuneration structure remain ‘at-risk’, employees may not hedge
against the risk inherent in arrangements such as the LTIP or any other equity-based incentive plans. Awards will
be forfeited if the policy is breached.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 51

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

3. PERFORMANCE AND REMUNERATION OUTCOMES

a) Overview of Company performance
Company performance during F20 was impacted significantly by the COVID-19 pandemic and challenging US wine
market conditions. Lease-adjusted EBITS and EBITS margin accretion both declined with the Company delivering
EBITS of $533.5 million, down 22% year on year. Lease-adjusted ROCE declined by 3.3 percentage points as a result
of the lower EBITS and TWE continues to take a disciplined approach to capital allocation.

The table below summarises the Company’s financial performance over the last five financial years.

Table 3.1: Overview of Company performance (reported)

FINANCIAL YEAR ENDED 30 JUNE 2020

20161

20171

20181

20191

EBITS performance (A$ million)
Earnings per share (cents)2
Dividends paid per share (cents)
Franked (%)
Closing share price ($ at 30 June)
Return on capital employed (%)

341.1
29.3
16
0
9.23
8.9

463.6
38.0
25
0
13.16
10.4

544.0
49.1
28
63
17.39
11.7

681.0
58.9
35
100
14.92
13.9

2020

533.5
43.9
403
100
10.48
10.6

1. Prior year results for EBITS, Earnings per share and Return on Capital Employed have been restated for changes in accounting policies.

Refer to note 32 of the Financial Statements for further information on AASB 16 Leases.

2. Before material items and SGARA.
3. The 2020 dividend of 40 cents is comprised of the final dividend in F19 of 20 cents (100% franked) paid on 4 October 2019 and the interim

F20 dividend of 20 cents (100% franked) paid on 3 April 2020. For the final F20 dividend see Note 6 of the Financial Statements.

The following graph shows movement in the Company share price against movement in the ASX200 over the last
five years.

400%

350%

300%

250%

200%

150%

100%

50%

Jul–2015

TWE
ASX200

Ja n –2016

Jul–2016

Ja n –2017

Jul–2017

Ja n –2018

Jul–2018

Ja n –2019

Jul–2019

Ja n –2020

Jul–2020

b) Fixed remuneration outcomes
Market benchmarking and salary reviews are conducted annually with any changes effective from 1 September.
In F20:

• The CEO, Mr Clarke, received an increase from $2,600,000 to $2,652,000 per annum, effective 1 September 2019,

an increase of 2%.

• The CFO, Mr Young, received an increase from $700,000 to $714,000 per annum, effective 1 September 2019,

an increase of 2%.

• Mr Ford, the COO, did not receive an increase during F20.

c) Short-term incentive outcomes
Short-term incentives are assessed by achievement against each executive’s Balanced Scorecard and specific
personal objectives.

The F20 STIP scorecard is heavily weighted to financial metrics with the primary driver EBITS. Our F20 EBITS
results reflect the impact of the COVID-19 pandemic, which had a significant impact on TWE’s trading performance
across all geographies throughout the second half of the year. Cost management throughout this period has seen
reductions in costs of doing business, including no payment of any discretionary employee incentives, including executives,
which related to F20 performance outcomes. The impacts of the pandemic and the challenging US wine market conditions
have been so significant and unpredictable as to render existing STIP metrics and targets no longer appropriate.

52 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Actual results for the Balanced Scorecard are provided below.

F20 STIP
SCORECARD

Financial goals
Global EBITS
Quality of EBITS Growth
Margin accretion and Simplify
for Growth

Strategic goals
Quality of Growth
I Care
Total

CEO

CFO

COO

WEIGHT

PAYMENT

WEIGHT

PAYMENT

WEIGHT

PAYMENT

40%
15%

15%

15%
15%
100%

0%
0%

0%
0%
0%

40%
15%

15%

15%
15%
100%

0%
0%

0%
0%
0%

40%
15%

15%

15%
15%
100%

0%
0%

0%
0%
0%

The table below sets out short-term incentive outcomes for each executive inclusive of the impact of individual
performance multiplier outcomes.

Table 3.2: F20 STIP outcomes

FR2 FOR STIP
OPPORTUNITY
($)

STIP
OPPORTUNITY
AT TARGET
(% OF FR)
(%)

STIP
OPPORTUNITY
AT TARGET
($)

STIP
AWARDED3
($)

TOTAL STIP
AWARDED
(% OF FR)3
(%)

CASH
($)

RESTRICTED
EQUITY
($)

TOTAL STIP
OPPORTUNITY
FORFEITED
(% OF FR)3
(%)

2,652,000
800,000
714,000

100%
66.5%
66.5%

2,652,000
532,000
474,810

–
–
–

0%
0%
0%

–
–
–

100%
100%
100%

EXECUTIVE1

MA Clarke
TM Ford
MJ Young

1. Reports only executives who were KMP at 30 June 2020.
2. FR is salary as of 1 September 2019.
3. As previously noted, the Board exercised it’s discretion to cancel the F20 STIP on the basis that the impacts of COVID-19 have been so

significant and unpredictable as to render existing STIP metrics and targets no longer appropriate to the current year.

d) Long-term incentive awards and outcomes

LTIP awarded during the year
Performance rights were allocated to executives under the F20 LTIP after the 2019 Annual General Meeting
and are subject to a three-year performance period. Any vesting is subject to two hurdles (detailed on page 50).
The performance rights have no exercise price and the minimum total value of the grant is zero. The maximum
value is the number of awards granted multiplied by the share price at vesting.

Table 3.3: F20 LTIP performance rights

EXECUTIVE

GRANT DATE

VESTING DATE

NUMBER OF
AWARDS
GRANTED

FACE VALUE
AT GRANT
DATE ($)2

FAIR VALUE
AT GRANT
DATE ($)3

Current
(as at 30 June 2020)
MA Clarke1
TM Ford
MJ Young

11 November 2019
11 November 2019
11 November 2019

30 June 2022
30 June 2022
30 June 2022

335,557
77,436
67,756

5,199,993
1,199,995
1,049,988

5,273,278
1,216,907
1,064,786

1. Mr Clarke forfeited 223,194 performance rights from the F20 LTIP on retirement on 1 July 2020.
2. The value of LTIP awards granted to executives was the face value of the volume weighted average price (VWAP) of Company shares sold

on the Australian Securities Exchange over the 90-day period up to and including 30 June 2019 ($15.4966 per share).

3. The fair value ($) in the table above is calculated using the valuation method detailed in note 22 of the Financial Statements.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 53

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

LTIP Vesting
The F18 LTIP was due to vest at the end of F20. The lease-adjusted vesting schedule for the F18 LTIP is provided below.

Relative TSR
Vesting Schedule

Relative TSR Ranking

Below 50th percentile
50th to 75th percentile
At or above 75th percentile

% of Performance Rights
subject to relative TSR
measure which vest
0%
35–100%
100%

ROCE baseline
10.4% (F17)

% ROCE growth

ROCE result

Less than 2.1%
2.1% to 2.8%
At or above 2.8%

Less than 12.5%
12.5% to 13.2%
At or above 13.2%

% of Performance Rights
subject to ROCE measure
which vest
0%
35–100%
100%

Performance is measured over the three-year period ended 30 June 2020. The Group’s relative TSR performance
was at the 40th percentile relative to its peer group while ROCE results, impacted significantly by the COVID-19
pandemic, were also below threshold. The Board elected not to apply discretion to the F18 LTIP, which resulted
in nil vesting for eligible executives.

The F18 LTIP vesting outcome by executive is provided below.

Table 3.4: Vesting / lapsing of F18 LTIP

EXECUTIVE

Current
(as at 30 June 2020)
MA Clarke
TM Ford
MJ Young

NUMBER OF
PERFORMANCE
RIGHTS
GRANTED

VALUE AT
GRANT1
($)

NUMBER
OF RIGHTS
VESTED

VALUE
VESTED2
($)

NUMBER
OF RIGHTS
WHICH
LAPSED3

VALUE
LAPSED2
($)

514,283
52,597
17,727

6,599,999
674,998
227,498

0
0
0

514,283
52,597
17,727

5,389,686
551,217
185,779

1. ‘Value at grant’ is calculated based on $12.8334 which was the volume weighted average price of Company shares sold on the ASX over

the 90 day period up to and including 30 June 2017. This was the price used to calculate the number of performance rights granted under
the F18 LTIP as previously disclosed by the Company.

2. The ‘value lapsed’ is calculated based on the closing share price on the performance period end date of 30 June 2020, being $10.48.
3. The number of rights which lapsed as they did not vest.

e) General employee share plan (Share Cellar)
All executives are participants of the 2019 Share Cellar Plan. Share acquisitions occurred in September 2019,
October 2019 and April 2020 with the relevant matching rights allocated to executives in F20. Subject to the executive
continuing to meet the plan rules, these matching rights will convert to matching shares when the plan vests.

54 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Table 3.5: Acquisitions in F20 for the 2018 Share Cellar Plan

EXECUTIVE

MECHANISM

ACQUISITION
DATE

ACQUISITION
PRICE

NUMBER
OF SHARES
ACQUIRED

NUMBER
OF RIGHTS
ALLOCATED

VALUE
OF RIGHTS
ALLOCATED
($)1

Current
(as at 30 June 2020)
MA Clarke2

TM Ford

MJ Young3

3 September 2019
30 October 2019
20 April 2020
3 September 2019
30 October 2019
20 April 2020
3 September 2019
30 October 2019
20 April 2020

18.87
17.37
10.61
18.87
17.37
10.61
18.87
17.37
10.61

120
52
172
120
52
172
120
52
172

120
52
172
120
52
172
0
52
172

2,264
903
1,825
2,264
903
1,825
0
903
1,825

1. The value of rights allocated at grant date is calculated based on the acquisition price.
2. 145 matched rights from the 2018 Share Cellar Plan and 344 matched rights from the 2019 Share Cellar Plan vested upon Mr Clarke’s

retirement on 1 July 2020.

3. Mr. Young acquired 120 shares on 3 September 2019 as part of the first tranche of the F20 Share Cellar plan. Subsequent to this

acquisition, Mr. Young transferred these shares to an ordinary share class holding and consequently became ineligible for matching
rights associated with this first tranche of shares.

During F20, the 2020 Share Cellar Plan was launched with payroll deductions commencing in April 2020. Actual
share acquisitions under the plan will be completed in F21, commencing September 2020. The Company continues
to have more than a third of all eligible employees participating in the Share Cellar Plan and investing their post-tax
pay to become shareholders.

f) Summary of awards held by executives
The table below sets out the number and movement of awards held by executives. Restricted Shares are generally
issued under STIP Deferral (Restricted Equity). Performance Rights are issued under the LTIP. Deferred Share Rights
are issued under the REP or represent the right to matching shares under the 2018 and 2019 Share Cellar Plans.

Table 3.6: Summary of awards held by executives

NAME

HELD AT
THE START
OF THE
REPORTING
PERIOD

GRANTED/
ACQUIRED
DURING
REPORTING
PERIOD

RECEIVED
UPON
VESTING/
EXERCISING

LAPSED OR
FORFEITED1

OTHER
CHANGE2

HELD AT THE
END
OF THE
REPORTING
PERIOD

Current
(as at 30 June 2020)
MA Clarke3

Restricted Shares
Performance Rights
Deferred Share Rights
Restricted Shares
Performance Rights
Deferred Share Rights
Restricted Shares
Performance Rights
Deferred Share Rights

106,613
800,246
303
18,115
114,266
303
1,946
78,195
87
1,120,074

70,838
335,557
–
14,928
77,436
–
10,990
67,756
–
577,505

(72,366)
–
(158)
(12,168)
–
(158)
(973)
–
–
(85,823)

–

(514,283)
–
–
(52,597)
–
–
(17,727)
–
(584,607)

–
–
344
–
–
344
–
–
137
825

105,085
621,520
489
20,875
139,105
489
11,963
128,224
224
1,027,974

TM Ford

MJ Young

Grand Total

1. Represents F18 LTIP performance rights which lapsed on 30 June 2020.
2. Represents matched rights granted as part of the Share Cellar global employee share plan in F20.
3. Of the 621,520 Performance Rights held by Mr Clarke as at 30 June 2020, 318,167 were forfeited pursuant to the good leaver provisions
of the LTIP Plan Rules (94,973 from the F19 LTIP and 223,194 from the F20 LTIP) on his retirement from TWE on 1 July 2020. The
number of Performance Rights retained after his retirement was calculated by reference to the number of days Mr Clarke was employed
by TWE during the Performance Periods of the relevant Plans.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 55

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

g) Remuneration of executives
The table below (Table 3.7) provides details of remuneration for the CEO and executives for F20, calculated in
accordance with statutory accounting requirements. All amounts are in Australian dollars and relate only to the
portion of the year in which the person occupied the KMP role.

Table 3.7: Remuneration of executives

EXECUTIVE

YEAR

SALARY/
FEES1

LEAVE
ACCRUAL2

NON-MONETARY
BENEFITS3

TOTAL CASH
INCENTIVE4

OTHER
PAYMENTS5

SUPERANNUATION/

TOTAL AMORTISATION

PENSION

VALUE OF LTIP6

OTHER

EQUITY7

TOTAL

PERFORMANCE

RELATED %8

TERMINATION

BENEFITS

SHORT-TERM BENEFITS

SHARE-BASED PAYMENTS

Current
(as at 30 June 2020)
MA Clarke9

TM Ford10, 11

MJ Young12

Total

F20
F19
F20
F19
F20
F19
F20
F19

2,622,331
2,562,802
778,997
338,602
690,664
679,469
4,091,992
3,580,873

(356,646)
207,830
27,147
52,613
12,776
(5,003)
(316,723)
255,440

(14,294)
415,669
25,265
5,550
10,665
8,120
21,636
429,339

–
2,600,000
–
276,130
–
403,433
–
3,279,563

–
75,983
–
–
–
–
–
75,983

1. Represents cash salary including any salary sacrificed items such as superannuation and novated motor vehicles.
2. Includes any net changes in the balance of annual leave and long service leave (i.e. leave entitlements that accrued during the year but

were not used).

3. Includes the provision of car parking, insurances, product allocations, executive medical checks, the value of entertainment, taxation
expenses, immigration/visa expenses and Fringe Benefits Tax on all benefits, where applicable. For Mr Clarke, it also includes
repatriation expenses and a payment Mr Clarke was required to make to TWE arising from a reconciliation of worldwide tax liabilities
performed under the terms of his prior year international co-location arrangement between Australia and the United States.

4. Represents cash payments made under the F19 STIP, excluding the Restricted Equity portion. No payment was made to any KMP

in relation to F20 STIP.

5. Includes allowances such as, but not limited to, relocation, car and repatriation.
6. Includes a proportion of the fair value of all outstanding LTIP offers at the start of the year, or which were offered during the year.

Under Australian Accounting Standards, the fair value is determined as at the offer date and is apportioned on a straight-line basis
across the expected vesting period after adjusting at each reporting date for an estimation of the number of shares that will
ultimately vest.

21,003

20,531

21,003

9,224

21,003

20,531

63,008

50,287

3,696,467

4,327,981

452,436

251,954

472,709

236,217

4,621,612

4,816,152

1,869,840

7,838,701

1,176,249

11,387,045

263,553

1,568,401

78,173

1,012,246

142,605

1,350,422

21,536

1,364,304

2,275,998

10,757,524

1,275,958

13,763,596

71%

46%

60%

46%

48%

–

56 | TREASURY WINE ESTATES ANNUAL REPORT 2020

g) Remuneration of executives

The table below (Table 3.7) provides details of remuneration for the CEO and executives for F20, calculated in

accordance with statutory accounting requirements. All amounts are in Australian dollars and relate only to the

portion of the year in which the person occupied the KMP role.

Table 3.7: Remuneration of executives

Current

(as at 30 June 2020)

MA Clarke9

TM Ford10, 11

MJ Young12

Total

were not used).

F20

F19

F20

F19

F20

F19

F20

F19

2,622,331

2,562,802

778,997

338,602

690,664

679,469

4,091,992

3,580,873

(356,646)

207,830

27,147

52,613

12,776

(5,003)

(316,723)

255,440

415,669

2,600,000

75,983

(14,294)

25,265

5,550

10,665

8,120

21,636

–

276,130

403,433

–

429,339

3,279,563

75,983

1. Represents cash salary including any salary sacrificed items such as superannuation and novated motor vehicles.

2. Includes any net changes in the balance of annual leave and long service leave (i.e. leave entitlements that accrued during the year but

3. Includes the provision of car parking, insurances, product allocations, executive medical checks, the value of entertainment, taxation

expenses, immigration/visa expenses and Fringe Benefits Tax on all benefits, where applicable. For Mr Clarke, it also includes

repatriation expenses and a payment Mr Clarke was required to make to TWE arising from a reconciliation of worldwide tax liabilities

performed under the terms of his prior year international co-location arrangement between Australia and the United States.

4. Represents cash payments made under the F19 STIP, excluding the Restricted Equity portion. No payment was made to any KMP

in relation to F20 STIP.

5. Includes allowances such as, but not limited to, relocation, car and repatriation.

6. Includes a proportion of the fair value of all outstanding LTIP offers at the start of the year, or which were offered during the year.

Under Australian Accounting Standards, the fair value is determined as at the offer date and is apportioned on a straight-line basis

across the expected vesting period after adjusting at each reporting date for an estimation of the number of shares that will

ultimately vest.

EXECUTIVE

YEAR

SALARY/

FEES1

LEAVE

ACCRUAL2

NON-MONETARY

BENEFITS3

TOTAL CASH

INCENTIVE4

OTHER

PAYMENTS5

SUPERANNUATION/
PENSION

TOTAL AMORTISATION
VALUE OF LTIP6

OTHER
EQUITY7

TOTAL

PERFORMANCE
RELATED %8

TERMINATION
BENEFITS

SHORT-TERM BENEFITS

SHARE-BASED PAYMENTS

21,003
20,531
21,003
9,224
21,003
20,531
63,009
50,287

3,696,467
4,327,981
452,436
251,954
472,709
236,217
4,621,612
4,816,152

1,869,840
1,176,249
263,553
78,173
142,605
21,536
2,275,998
1,275,958

7,838,701
11,387,045
1,568,401
1,012,246
1,350,422
1,364,304
10,757,524
13,763,596

71%
71%
46%
60%
46%
48%

–
–
–
–
–
–
–
–

Includes a proportion of the fair value of all Restricted Shares and Deferred Share Rights held under outstanding Restricted Equity
Plans at the start of the year. F18 and F19 STIP Restricted Equity were outstanding at the end of F20. Under Australian Accounting
Standards, the fair value is determined as at the offer date and is apportioned on a straight-line basis across the expected vesting period
after adjusting at each reporting date for an estimation of the number of shares that will ultimately vest.

8. Represents the sum of incentive and Performance Rights/Restricted Equity as a percentage of total remuneration, excluding

termination payments. No termination payments were made to Executives during F20.
9. Mr Clarke’s salary was adjusted on 1 September 2019 from AU$2,600,000 to AU$2,652,000.
10. F19 amounts reported for Mr Ford for KMP period commencing from 19 January 2019.
11. Mr Ford’s salary was adjusted on 1 March 2019 from AU$700,000 to AU$800,000, no further increase was made to Mr Ford’s salary in F20.
12. Mr Young’s salary was adjusted on 1 September 2019 from AU$700,000 to AU$714,000.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 57

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

NON-EXECUTIVE DIRECTOR REMUNERATION

4. FRAMEWORK AND OUTCOMES

This section of the report refers to the following non-executive directors.

NAME

POSITION

DATES

Non-executive directors
Current
PA Rayner
EYC Chan
LW Cheang
WL Every-Burns
GA Hounsell
CE Jay
LM Shanahan
A Korsanos

Chairman
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director

Full year
Full year
Full year
Full year
Full year
Full year
Full year
From 1 April 2020

a) Fee pool
The current maximum aggregate fee pool of $2,500,000 per annum (inclusive of superannuation) was approved by
shareholders at the 2016 Annual General Meeting.

b) Non-executive director fees
The level of non-executive directors’ fees takes into account the risks and responsibilities of the role, the global reach
and complexity of the business, director skills and experience, and market benchmark data (provided by independent
external consultants).

There were no increases to Chairman or non-executive director fees during F20.

Table 4.1: F20 Non-executive director fees

BOARD/COMMITTEE

Board base fee
Audit and Risk Committee
Human Resources Committee
Nominations Committee

CHAIRMAN
FEE ($)

530,000
45,000
41,200
10,0001

MEMBER
FEE ($)

193,000
22,000
20,600
5,000

The above fees were effective from 1 April 2019 are inclusive of superannuation.

1. The Chairman of the Board, Mr Rayner, is also the Chairman of the Nominations Committee. He does not receive any additional fees for

this role.

In addition to the above fees, non-executive directors receive a wine allowance. In order to maintain independence,
non-executive directors do not participate in the Company’s incentive plans and they do not receive retirement benefits
other than the superannuation contributions disclosed in this report.

58 | TREASURY WINE ESTATES ANNUAL REPORT 2020

c) Non-executive director outcomes
Details of non-executive director remuneration for F20 and F19 are provided below.

Table 4.2: F20 Non-executive director remuneration

NON-EXECUTIVE DIRECTOR

PA Rayner

EYC Chan

L Cheang2

WL Every-Burns

GA Hounsell

CE Jay

LM Shanahan

A Korsanos3

Total

YEAR

FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19

FEES
($)

NON-MONETARY
BENEFITS1
($)

SUPER-
ANNUATION
($)

508,997
498,219
211,865
204,858
190,907
106,589
218,447
213,742
237,447
228,591
214,650
209,188
213,600
208,838
49,087
–
1,845,000
1,670,025

16,088
14,088
4,000
4,000
4,000
2,000
6,660
6,660
6,660
6,660
4,000
4,000
4,000
4,000
1,000
–
46,409
41,409

21,003
20,531
3,135
4,329
2,093
3,369
20,753
20,245
21,003
20,436
–
–
–
–
4,663
–
72,650
68,910

TOTAL
($)

546,088
532,838
219,000
213,187
197,000
111,958
245,860
240,647
265,110
255,687
218,650
213,188
217,600
212,838
54,750
–
1,964,059
1,780,344

1. Includes product allocations, entertainment and Fringe Benefits Tax, where applicable. The amounts for Mr Rayner includes car parking.
2. Ms Cheang commenced as Non Executive Director from 1 December 2018.
3. Ms Korsanos commenced as Non Executive Director from 1 April 2020.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 59

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

OTHER REMUNERATION INFORMATION

5. GOVERNANCE

a) Role of the Human Resources Committee (HRC)
The HRC provides assistance to the Board in relation to such matters as monitoring remuneration principles and
frameworks, providing advice on remuneration matters, making remuneration recommendations for executives,
approving incentive plans, and reviewing and governing remuneration policies. In addition to its remuneration
responsibilities and together with the Board, the HRC’s duties include overseeing talent management, diversity
and leadership development.

The Committee ensures that the Company’s policies and frameworks aid the achievement of the Group’s strategic
objectives, provide appropriate governance, are aligned with market practice, and fulfil the Board’s responsibility
to shareholders. During the year the Audit & Risk Committee Chair attended all Human Resources Committee
meetings as a Committee member. Also, the Human Resources Committee Chair typically attends the Audit & Risk
Committee meetings, providing a link between both Committees to assist with oversight of non-financial risk.

As outlined in Section 4 of the Corporate Governance Statement disclosed on the Company’s website www.tweglobal.com,
the Group has procedures in place for the reporting of any matter that may give rise to a conflict between the interests
of a director and those of the Group. In addition, the Group has adopted a general policy for employees in relation to
the disclosure and management of potential conflicts of interest (see Section 4 of the Corporate Governance Statement
on www.tweglobal.com).

b) Engagement of remuneration advisors

In F20, the Board and HRC engaged PwC as an independent advisor to the HRC. Potential conflicts of interest are
considered by the HRC, and the Board and HRC are satisfied that the advice provided by PwC was free from undue
influence. Any advice provided by remuneration consultants is used as a guide only and is not a substitute for detailed
consideration of all relevant issues by the HRC. No remuneration recommendations, as defined by the Corporations
Act 2001 (Cth), were provided.

c) Executive and non-executive director share ownership
Executives and non-executive directors are encouraged to have control over ordinary shares in the Company, and
executives and non-executive directors are required to hold at least the equivalent of one year’s fixed remuneration
or base fees. The guidelines are expected to be met over a reasonable period of time (approximately five years).
The Group’s variable incentive programs contribute towards executives meeting this guideline. The Director Share
Acquisition Plan (DSAP) allows directors to apply after-tax fees to the acquisition of the Company’s shares on
a periodic basis at the prevailing market rate. The table below sets out KMP shareholdings.

Table 5.1: KMP shareholdings

F20

Executive
Current
(as at 30 June 2020)
MA Clarke
TM Ford3
MJ Young
Executive total

BALANCE
AT START OF
THE YEAR

RECEIVED
UPON VESTING/
EXERCISE1

OTHER
CHANGES
DURING
THE YEAR2

BALANCE
AT END
OF YEAR

888,586
82,778
16,973
988,337

72,524
12,326
973
85,823

(246,205)
(44,905)
766
(290,344)

714,905
50,199
18,712
783,816

60 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Table 5.1: KMP shareholdings (continued)

F20

Non-executive directors
Current
(as at 30 June 2020)
PA Rayner
EYC Chan
L Cheang6
WL Every-Burns
GA Hounsell
CE Jay
LM Shanahan
T Korsanos7
Non-executive director total
Grand total

BALANCE
AT START OF
THE YEAR

ACQUIRED
DURING THE
YEAR AS
PART OF
DSAP4

OTHER
CHANGES
DURING
THE YEAR2

BALANCE
AT END
OF YEAR5

280,234
48,280
–
100,000
83,500
2,862
11,559
–
526,435
1,514,772

–
–
–
–
–
520
–
–
520
86,343

17,585
–
–
–
–
–
–
5,000
22,585
(267,759)

297,819
48,280
–
100,000
83,500
3,382
11,559
5,000
549,540
1,333,356

1. Includes release of restricted shares under Tranche 1 of F17 Deferred STIP and Tranche 2 of F18 Deferred STIP, and vesting of Share

Cellar matched rights.

2. Includes the purchase/sale of ordinary shares during F20 and for Mr Young, shares received under TWE’s dividend reinvestment plan.
3. Following the end of the financial year, 5,947 restricted shares granted under the F18 Deferred STIP and 7,464 restricted shares granted
under the F19 Deferred STIP, vested and were released to Mr Ford, leaving a shareholding balance of 63,610 as at the date of this report.

4. Shares acquired by Directors using post-tax fees in TWE’s Director Share Acquisition Plan (DSAP).
5. No changes in shareholdings have occurred for non-executive directors from the balance date to the date of this report.
6. Ms Cheang has been granted an exemption from TWE’s minimum shareholding requirement due to the extensive regulatory processes for
securities trading that apply in relation to her role as Vice Chairman and Chief Executive of Hang Seng Bank Limited and Group General
Manager of HSBC Holdings plc.

7. Shares acquired by Ms Korsanos represent her opening shareholding upon commencement as a Director.

6. FURTHER INFORMATION

a) Executive contracts
There is no fixed term for executive contracts. The Company may terminate service agreements immediately for
cause, in which case the executive is not entitled to any payment other than the value of fixed remuneration and
accrued leave entitlements up to the termination date. On resignation all executives are required to give six months’
notice. If the termination is Company initiated without cause, all executives have termination provisions of six
months’ notice by the Company plus six months’ severance pay.

b) Other transactions with KMP and their personally related entities
The Group entered into transactions which are insignificant in amount with KMP and their related parties within
normal employee, customer or supplier relationships on terms and conditions no more favourable than those available
in similar arm’s length dealings which include payments of salaries and benefits and purchase of Group products.

Some directors of the Company are also directors of public companies which have transactions with the Group.
The relevant directors do not believe they have the individual capacity to control or significantly influence the
financial policies of those companies. The companies are therefore not considered to be related parties for the
purpose of the disclosure requirements of the Corporations Act 2001.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 61

F20 REMUNERATION REPORT (AUDITED) (CONTINUED)

c) Prior years’ equity arrangements
This section summarises all outstanding equity arrangements for executives, as reported in previous
Remuneration Reports.

The below equity plans have no exercise price and the minimum total value of the grant is zero.
The maximum value is the number of awards granted multiplied by the share price at vesting.

Table 6.1: Prior years’ restricted equity1

EXECUTIVE PLAN

INSTRUMENT
TYPE

ALLOCATION
DATE

NUMBER

FACE
VALUE AT
ALLOCATION
DATE2,3,4
($)

FAIR
VALUE AT
ALLOCATION
DATE5
($)

VESTING

DATE

MA Clarke

TM Ford

MJ Young

F18 STIP
(tranche 2)
F19 STIP
(tranche 1)
F19 STIP
(tranche 2)
F19 LTIP6 Performance

Restricted
Shares
Restricted
Shares
Restricted
Shares

2018 Share
Cellar
2018 Share
Cellar
2018 Share
Cellar
F18 STIP
(tranche 2)
F19 STIP
(tranche 1)
F19 STIP
(tranche 2)
F19 LTIP

2018 Share
Cellar
2018 Share
Cellar
2018 Share
Cellar

Rights
Matched
Rights
Matched
Rights
Matched
Rights
Restricted
Shares
Restricted
Shares
Restricted
Shares
Performance
Rights
Matched
Rights
Matched
Rights
Matched
Rights
Restricted
Shares
Restricted
Shares
Restricted
Shares
Performance
Rights
Matched
Rights
Matched
Rights
Matched
Rights

14 September 2018

34,247

624,997

14 August 2020

13 September 2019

35,419

649,987

14 August 2020

13 September 2019

35,419

649,987

16 August 2021

12 November 2018

285,963

5,000,006

3,691,782

30 June 2021

3 September 2018

2 November 2018

6 March 2019

1,131

1 September 2020

454

906

454

1 September 2020

906

1 September 2020

14 September 2018

5,947

108,531

14 August 2020

13 September 2019

7,464

136,975

14 August 2020

13 September 2019

7,464

136,975

16 August 2021

12 November 2018

61,669

1,078,270

796,147

30 June 2021

3 September 2018

2 November 2018

6 March 2019

1,131

1 September 2020

454

906

454

1 September 2020

906

1 September 2020

14 September 2018

973

17,757

14 August 2020

13 September 2019

5,495

100,841

14 August 2020

13 September 2019

5,495

100,841

16 August 2021

12 November 2018

60,468

1,057,271

780,642

30 June 2021

3 September 2018

2 November 2018

6 March 2019

1 September 2020

1. Reports only executives who were KMP at 30 June 2020.
2. The value of STIP Deferral at allocation date is calculated based on the five-day VWAP up to and including the allocation date.

The F18 and F19 STIP allocation price was $18.2497 and $18.3514 respectively.

3. The value of F19 LTIP awards at allocation date is calculated based on the ninety-day VWAP up to and including 30 June 2018

($17.4848 per share). The vesting schedule is provided in Table 6.2.

4. The value of matched rights is calculated based on the purchase price of the 2018 Share Cellar shares at each purchase date.
5. This LTIP value is calculated using the valuation method detailed in Note 21 of the Financial Statements. All other plans are

based on face value.

6. Mr Clarke forfeited 94,973 performance rights from the F19 LTIP on retirement on 1 July 2020.

62 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Table 6.2: F19 LTIP vesting schedules

Relative TSR
Vesting Schedule

Relative TSR Ranking

Below 50th percentile
50th to 60th percentile
60th to 75th percentile
At or above 75th percentile

ROCE baseline
12.6% (F18)

% ROCE growth

ROCE result

Less than 1.9%
1.9% to 2.6%
At or above 2.6%

Less than 14.5%
14.5% to 15.2%
At or above 15.2%

d) Definitions

TERM

DEFINITION

% of Performance Rights
subject to relative TSR
measure which vest
0%
35–70%
70–100%
100%

% of Performance Rights
subject to ROCE measure
which vest
0%
35-100%
100%

Constant currency An exchange rate that eliminates the effects of exchange rate fluctuations year-on-year.

Earnings per Share
(EPS)

NPAT excluding SGARA and material items, divided by the weighted average number of shares.
Adjusted EPS is used to calculate performance outcomes, meaning that the Board retains the
discretion to adjust EPS to ensure that participants are not penalised or provided with a windfall
gain arising from matters outside of management’s control.

EBITS

Earnings before interest, tax, SGARA and material items.

Key management
personnel (KMP)

Those persons having authority and responsibility for planning, directing and controlling the
major activities of the Company and the Group, directly or indirectly, including any director
(whether executive or otherwise), as listed in the introduction to the Remuneration Report.

Phantom Shares

Units which provide the participant with a right to receive a cash payment at the vesting date,
whereby the payment is tied to the market value of an equivalent number of TWE shares.
The amount of the payout will increase as the share price rises, and decrease if the share price
falls, but without the participant actually receiving any TWE shares.

Relative Total
Shareholder
Return (TSR)

Restricted Equity

The return on investment of a company relative to a peer group of companies.

Rights or shares granted by TWE that vest upon the satisfaction of certain conditions, such as
continued employment for a period of time or the achievement of particular performance milestones.
The plan participant cannot deal in the equity until it vests and the restriction is lifted.

Return on Capital
Employed (ROCE)

EBITS divided by Capital Employed (at constant currency). Capital Employed is the sum of average
net assets (adjusted for SGARA impact) and average net debt.

SGARA

Self-generating and regenerating assets.
The adjustment to self-generating and regenerating assets (SGARA) is excluded to reflect the fair
value adjustment each financial year which is largely due to environmental conditions not within
the Group’s control.

Total Shareholder
Return (TSR)

Total return on investment of a security, taking into account both capital appreciation and distributed
income that was reinvested.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 63

CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020

Revenue
Cost of sales
Gross profit

Selling expenses
Marketing expenses
Administration expenses
Other expenses
Profit before tax and finance costs

Finance income
Finance costs
Net finance costs
Profit before tax

Income tax expense
Net profit
Net profit attributable to non-controlling interests
Net profit attributable to members of Treasury Wine Estates Limited

Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Cash flow hedges
Tax on cash flow hedges
Exchange gain/(loss) on translation of foreign operations
Other comprehensive income for the year, net of tax

Total comprehensive income for the year attributable
to members of Treasury Wine Estates Limited
Non-controlling interests
Total comprehensive income for the year

Earnings per share for profit attributable
to the ordinary equity holders of the Company
Basic
Diluted

NOTE

2020
$M

RESTATED1
2019
$M

2,678.2
(1,588.9)
1,089.3

2,883.0
(1,642.5)
1,240.5

(312.7)
(125.5)
(144.7)
(50.8)
455.6

54.1
(140.0)
(85.9)
369.7

(108.9)
260.8
–
260.8

(15.5)
3.9
14.5
2.9

263.7
–
263.7

(328.3)
(118.3)
(117.9)
(14.7)
661.3

47.4
(133.1)
(85.7)
575.6

(167.1)
408.5
–
408.5

(15.0)
4.4
66.1
55.5

464.0
–
464.0

CENTS
PER SHARE

CENTS
PER SHARE1

7
7

36.2
36.2

56.9
56.6

The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

64 | TREASURY WINE ESTATES ANNUAL REPORT 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020

Current assets
Cash and cash equivalents
Receivables
Inventories
Assets held for sale
Other current assets
Total current assets

Non-current assets
Inventories
Property, plant and equipment
Right-of-use assets
Agricultural assets
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets

Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Borrowings
Other current liabilities
Total current liabilities

Non-current liabilities
Borrowings
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets

Equity
Contributed equity
Reserves
Retained earnings
Total parent entity interest
Non-controlling interests
Total equity

NOTE

2020
$M

RESTATED1
2019
$M

9
9
9
14

9
10
11
12
13
23

16
18

18
23

19
21

449.1
553.5
1,017.4
74.3
6.0
2,100.3

1,059.2
1,397.4
517.0
34.1
1,331.6
183.5
48.8
4,571.6
6,671.9

682.1
22.9
53.9
223.3
0.8
983.0

1,702.3
334.2
29.0
2,065.5
3,048.5
3,623.4

3,269.8
12.0
337.5
3,619.3
4.1
3,623.4

401.8
661.3
1,001.7
78.3
3.2
2,146.3

1,045.6
1,369.9
535.9
29.4
1,308.9
187.0
18.5
4,495.2
6,641.5

718.6
95.4
43.6
67.3
1.8
926.7

1,727.3
334.7
11.3
2,073.3
3,000.0
3,641.5

3,243.8
29.1
364.5
3,637.4
4.1
3,641.5

The consolidated statement of financial position should be read in conjunction with the accompanying notes.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 65

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020

CONTRIBUTED
EQUITY
$M

RETAINED
EARNINGS
$M

FOREIGN
CURRENCY
TRANSLATION
RESERVE
$M

OTHER
RESERVES
$M

TOTAL
$M

NON-
CONTROLLING
INTERESTS
$M

TOTAL
EQUITY
$M

Balance at 30 June 20181

3,235.4

207.3

Profit for the year1
Total other comprehensive
income/(loss)1
Total comprehensive income
for the year/(loss)1

Transactions with owners
in their capacity as owners
directly in equity
Share based payment expense
Vested deferred shares
and share rights
Dividends to owners
of the Company
Balance at 30 June 20191

Profit for the year
Total other comprehensive
income/(loss)
Total comprehensive income
for the year/(loss)

Transactions with owners
in their capacity as owners
directly in equity
Share based payment expense
Vested deferred shares
and share rights
Dividends to owners
of the Company
Balance at 30 June 2020

–

1.6

6.8
3,243.8

–

14.5

11.5
3,269.8

408.5

–

408.5

–

(251.3)
364.5

260.8

–

260.8

–

(287.8)
337.5

6.0

–

66.1

–

–
72.1

–

14.5

–

–
86.6

(7.2) 3,441.5

4.3 3,445.8

–

408.5

(10.6)

55.5

(10.6)

464.0

18.9

(44.1)

(42.5)

–

(244.5)
(43.0) 3,637.4

–

260.8

(11.6)

2.9

(11.6)

263.7

10.9

(30.9)

(16.4)

–

(276.3)
(74.6) 3,619.3

–

408.5

55.5

464.0

18.9

(42.5)

(0.2)
(244.7)
4.1 3,641.5

–

260.8

2.9

263.7

10.9

(16.4)

–
4.1

(276.3)
3,623.4

The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

66 | TREASURY WINE ESTATES ANNUAL REPORT 2020

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020

Cash flows from operating activities
Receipts from customers
Payments to suppliers, governments and employees
Borrowing costs paid
Income taxes paid
Interest paid
Net cash flows from operating activities

Cash flows from investing activities
Payments for property, plant, and equipment
Payments for intangible assets
Payments for subsidiaries, net of cash acquired
Proceeds from sale of property, plant and equipment
Net cash flows used in investing activities

Cash flows from financing activities
Dividend payments
Proceeds from borrowings
Repayment of borrowings
Purchase of shares – employee equity plans
Net cash flows used in financing activities
Total cash flows from activities

Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on foreign currency cash flows
and cash balances
Cash and cash equivalents at end of the year

2020
$M
INFLOWS/
(OUTFLOWS)

RESTATED1
2019
$M
INFLOWS/
(OUTFLOWS)

NOTE

3,616.6
(2,975.7)
(4.0)
(168.0)
(80.1)
388.8

3,689.2
(3,030.0)
(7.3)
(112.5)
(77.5)
461.9

(136.6)
(29.9)
(22.3)
100.2
(88.6)

(276.3)
329.2
(300.4)
(4.9)
(252.4)
47.8

401.8

(0.5)
449.1

(132.0)
(27.8)
(0.9)
102.5
(58.2)

(244.7)
707.6
(538.5)
(16.6)
(92.2)
311.5

89.4

0.9
401.8

The consolidated statement of cash flows should be read in conjunction with the accompanying notes.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
ABOUT THIS REPORT
FOR THE YEAR ENDED 30 JUNE 2020

Working capital: shows the assets and liabilities
generated through trading activity. It provides information
regarding working capital management and analysis
of the elements of working capital.

Operating assets and liabilities: provides information
regarding the physical assets and non-physical assets used
by the Group to generate revenues and profits (including
associated liabilities). This section also explains the
accounting policies applied and specific judgements and
estimates made by management in arriving at the value
of these assets and operating liabilities.

Capital structure: provides information about the capital
management practices adopted by the Group – particularly
how much capital is raised from shareholders (equity)
and how much is borrowed from financial institutions
(debt) in order to finance the activities of the Group both
now and in the future.

Taxation: sets out the Group’s tax accounting policies,
the current and deferred tax charges, a reconciliation
of profit or loss before tax to the tax charge or credit
and the movements in deferred tax assets and liabilities.

Risk: discusses the Group’s exposure to various financial
risks, explains how these affect the financial position
of the Group and what is done to manage these risks.

Group composition: explains aspects of the Group’s
structure and business acquisitions.

Other: other required disclosures under Australian
Accounting Standards and IFRS.

Key estimates and judgements

In preparing this financial report, the Group is required
to make estimates, judgements and assumptions that
affect the reported amounts in the financial statements.

These estimates, judgements and assumptions are
continually evaluated, and are based on forecasts of
economic conditions which reflect expectations and
assumptions as at 30 June 2020 about future events that
the Directors believe are reasonable in the circumstances.

The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates
are significant to the financial statements:

Note 3: Revenue
Note 9: Working capital
Note 11: Right-of-use assets
Note 12: Agricultural assets
Note 13: Intangible assets
Note 15: Impairment of non-financial assets
Note 23: Income tax

NOTE 1 – ABOUT THIS REPORT

Treasury Wine Estates Limited (‘the Company’) is a
for profit company incorporated in Australia and limited
by shares which are publicly traded on the Australian
Securities Exchange (ASX). The consolidated financial
statements comprise the Company and its controlled
entities (collectively, ‘the Group’).

The accounting policies that are critical to understanding
the financial statements are set out in this section.
Where an accounting policy is specific to one note, the
policy is described in the note to which it relates.

Basis of preparation
The consolidated financial statements are general
purpose financial statements prepared in accordance
with Australian Accounting Standards (AASBs) adopted
by the Australian Accounting Standards Board (AASB)
and the Corporations Act 2001. The consolidated
financial statements comply with the International
Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Boards (IASB).
They were authorised for issue by the Board of Directors
on 25 August 2020.

The financial statements are presented in Australian
dollars with all values rounded to the nearest tenth
of one million dollars unless otherwise stated,
in accordance with ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191.

This is the first set of the Group’s annual financial
statements in which AASB 16 Leases has been applied.
The impact of AASB 16 and other accounting standards
and interpretations adopted during the year is set out
in note 32.

Notes to the financial statements
The notes include additional information required
to understand the financial statements that is material
and relevant to the operations, financial position and
performance of the Group.

Information is considered material and relevant if the
amount in question is significant because of its size,
nature or incidence or it helps to explain the impact
of significant changes in the business, for example,
acquisitions and asset write-downs.

Line items labelled ‘other’ on the face of the consolidated
statements comprise miscellaneous income, expenses,
assets, liabilities or cash flows which individually
or in aggregate are not considered material to warrant
additional disclosures.

Where applicable, comparative periods have been
adjusted to disclose comparatives on the same basis
as the current year.

The notes are organised into the following sections:

Earnings: focuses on the financial results and
performance of the Group. It provides disclosures
relating to income, expenses, segment information,
material items and earnings per share.

68 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 1 – ABOUT THIS REPORT (CONTINUED)

Key estimates and judgements (continued)

COVID-19 considerations
The ongoing COVID-19 pandemic has increased the
estimation uncertainty in the preparation of financial
statements, generally, due to the impact of the
following factors:

• the extent and duration of actions by governments,
businesses and consumers to contain the spread
of the virus;

• the extent and duration of the expected economic
downturn. This includes the disruption to capital
markets, deteriorating credit, higher unemployment,
and changes in consumer discretionary spending
behaviours; and

• the effectiveness of government measures that have and
will be put in place to support businesses and consumers
through this disruption and economic downturn.

During F20, the Group experienced the following
impacts on its operations and financial statements
as a result of these factors:

• Governments took varying approaches to containment

of the virus in each of TWE’s markets. In general,
retail and e-commerce channels remained open and
other channels (including restaurants, bars, cellar
doors and travel retail) were closed for the majority
of 2H20 but re-commenced opening at different rates
across individual markets.

• In-home consumption increased during periods

of lockdown, primarily through retail and
e-commerce channels.

• Consumers generally turned to well-known and

trusted brands, which drove volumes of Commercial,
Masstige and lower Luxury wines. Higher value
luxury wines were negatively impacted by lower
consumption – driven in part by the closure of key
luxury channels, the reduction in social gathering
and social occasions, and lower discretionary
consumer spending on Luxury products.

• In the majority of TWE’s markets, governments have
put in place fiscal and economic stimulus packages
of varying natures, the majority of which remain in
place at 30 June 2020, and at the date of this report.

• Agricultural activities (including wine production) has
generally been considered an essential service in all
of the Group’s key sourcing regions, with no material
interruptions encountered through global operations.

In respect of these financial statements, the impact of
COVID-19 is primarily relevant to estimates of future
performance which is in turn relevant to the areas
of impairment of non-financial assets (note 15), net
realisable value of inventory (note 9), recoverability
of receivables (note 9) and recoverability of income tax
losses (note 23). Other areas of estimates, judgements
and assumptions for the Group are not impacted by
estimates of future performance.

In making estimates of future performance, the
following assumptions and judgements in relation to the
potential impact of COVID-19 have been applied by the
Group. Actual results may differ from these estimates
under different assumptions and conditions.

• Retail and e-commerce channels are assumed to remain
open at the levels as at 30 June 2020, in all regions.

• All regions will continue a phased ‘re-opening’ of

previously closed channels (bars, restaurants, cellar
doors, travel retail) to Pre-COVID-19 levels at a
progressive rate over the course of F21. All channels
are assumed to be open by the end of F21 with the
exception of travel retail which will not fully re-open
until F22.

• In-home consumption, and therefore retail and

e-commerce channel sales, are assumed to reduce
in line with re-opening of on-premise channels (bars,
restaurants) but return to levels generally elevated
against Pre-COVID-19 conditions.

• Luxury wine consumption assumed to progressively

return to Pre-COVID-19 levels over the course of F21,
but assumed to be below Pre-COVID-19 levels in key
festive selling periods (Christmas, New Year, Chinese
New Year).

• Government fiscal and economic stimulus packages are
maintained or extended, but phased out as economies
return to historical output levels.

• Agricultural activities (including wine production)

continue to be considered an essential service in all
of the Group’s key sourcing regions.

• As noted above, the Group assumes a trend of general
recovery. Whilst further virus outbreaks may occur in
some regions, the Group does not assume a significant
‘second wave’ event which results in major lockdowns
(similar to those experienced in the second half of F20)
in the Group’s primary sales regions.

Key assumptions and judgements have been stress
tested for the impacts of COVID-19 with further
downside sensitivity. As a result, more extensive
changes in assumptions have been considered and
disclosed in the financial statements.

Further details on the estimates, judgements and
assumptions applied by the Group within these
Financial statements are included within the relevant
Notes, including sensitivities applied to ensure financial
statements and disclosures are appropriate.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 69

Foreign group companies
As at the reporting date, the assets and liabilities of
overseas subsidiaries are translated into Australian
dollars at the rate of exchange ruling at the balance
sheet date and the income statement is translated at
the average exchange rates for the period. The exchange
differences arising on the translation are recognised
in the foreign currency translation reserve within equity.

When a foreign operation is sold, the cumulative exchange
difference in equity for this operation is recognised in
the consolidated statement of profit or loss and other
comprehensive income as part of the gain and loss on sale.

Transactions and balances
Transactions in foreign currencies are initially recorded
in the functional currency of the relevant entity at the
exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are subsequently translated at the rate
of exchange ruling at the balance sheet date.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
ABOUT THIS REPORT
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 1 – ABOUT THIS REPORT (CONTINUED)

Principles of consolidation
The consolidated financial statements include the assets
and liabilities of Treasury Wine Estates Limited and
its controlled entities as a whole at year-end and the
consolidated results and cash flows for the year. A list
of controlled entities (subsidiaries) is provided in note 27.

An entity is regarded as a controlled entity when the
Company is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability
to affect those returns through power over the entity.

The rights of other investors to the results and equity
of the subsidiaries (called non-controlling interests) are
shown separately in the consolidated statement of profit
or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated
statement of financial position respectively.

The financial information of the subsidiaries is prepared
for the same reporting period as the parent, using
consistent accounting policies. Intra-group balances
and transactions arising from intra-group transactions
are eliminated.

A change in the ownership interest of a subsidiary,
without a loss of control, is accounted for as an
equity transaction.

Functional and presentation currency
The consolidated financial statements are presented
in Australian dollars. Each entity in the Group
determines its own functional currency and items
included in the financial statements of each entity are
measured using that functional currency. The major
functional currencies used throughout the Group include
Australian Dollar (AUD), United States Dollar (USD)
and Great British Pound (GBP). Other currencies used
include the Canadian Dollar, Euro, New Zealand Dollar,
Singapore Dollar, Swedish Krona, Norwegian Krone,
Chinese Renminbi and South African Rand.

70 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Subsequent events
As at 1 July 2020, Tim Ford was appointed as the
Company’s new CEO and Managing Director following
the retirement of Michael Clarke.

Since the end of the financial year, the Directors
approved a final 100% franked dividend of 8.0 cents
per share. This dividend has not been recognised
as a liability in the consolidated financial statements
at 30 June 2020.

On 18 August 2020 the Group was advised that the
Chinese Ministry of Commerce had initiated an anti-
dumping investigation into Australian wine exports
into China. The Group will co-operate with any requests
for information from Chinese or Australian authorities.
Given the uncertainty regarding the extent, timing and
outcome of the investigation, the financial impact on the
Group’s operations or financial position, if any, cannot
be reasonably estimated at this time.

The Directors are not aware of any other matters
or circumstances that have arisen since the end of
the financial year which have significantly affected
or may significantly affect the operations of the Group,
the results of those operations or the state of affairs
of the Group in subsequent financial years.

NOTE 1 – ABOUT THIS REPORT (CONTINUED)

Exchange differences arising are recognised in the
consolidated statement of profit and loss and other
comprehensive income, except for gains or losses arising
on assets or liabilities that qualify for hedge accounting,
discussed further in note 24. Tax charges and credits
attributable to these exchange differences are also
recognised in equity.

Average exchange rates used in translating profit
and loss items in F20 are:

A$1 = US$ 0.671 (F19: US$ 0.715)
A$1 = GB£ 0.533 (F19: GB£ 0.553)

Year-end exchange rates used in translating financial
position items in F20 are:

A$1 = US$ 0.687 (F19: US$ 0.701)
A$1 = GB£ 0.558 (F19: GB£ 0.553)

Fair value measurement
The Group measures certain financial instruments,
including derivatives, and certain non-financial assets
such as agricultural assets, at fair value at each balance
sheet date.

Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants in its principal
or most advantageous market at the measurement date.
It is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming that market participants act in their economic
best interest. A fair value measurement of a non-financial
item assumes it is put to its highest and best use.

The Group uses valuation techniques that are appropriate
in the circumstances and for which sufficient data is
available to measure fair value, maximising the use
of relevant observable inputs and minimising the use
of unobservable inputs.

Accounting standards prescribe a fair value hierarchy,
described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:

Level 1 – Quoted (unadjusted) market prices in active
markets for identical assets or liabilities.

Level 2 – Valuation techniques for which the lowest level
input that is significant to the fair value measurement
is directly (i.e. as prices) or indirectly (i.e. derived by
prices) observable.

Level 3 – Valuation techniques for which the lowest level
input that is significant to the fair value measurement
is unobservable.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 2 – SEGMENT INFORMATION

Segment accounting policies

The Group’s segments
The Group reports segment information on the same
basis as its internal management reporting structure
and consistent with the information used to organise
and manage the Group.

The reportable segments are based on the aggregation
of operating segments determined by the similarity of the
nature of products, the production process, the types of
customers and the methods used to distribute the products.

Segment assets and liabilities
Segment assets and liabilities represent those working
capital and non-current assets and liabilities which are
located in the respective segments. Cash and borrowings,
other than lease liabilities, are not considered to be
segment assets/liabilities as they are managed by our
centralised treasury function. Consistent with the use
of EBITS for measuring profit, tax assets and liabilities,
which do not contribute towards EBITS, are not
allocated to operating segments.

Intersegment transactions
The price of an intersegment transaction is set at
an arm’s length basis. Whilst these transactions are
eliminated on consolidation, they are shown within
the segment revenue and EBITS to properly reflect the
segment of origin performance, including production.

Corporate charges
Unallocated corporate charges are reported in the
Corporate/unallocated segment. Net finance costs
are not allocated to segments as the Group’s financing
function is centralised through its treasury function.

Segment loans payable and loans receivable
Segment loans are initially recognised at the amount
transferred. Intersegment loans receivable and payable
that earn or incur non-market interest are adjusted
to fair value based on market interest rates.

Other
If items of revenue and expense are not allocated to
operating segments, then any associated assets and
liabilities are not allocated to segments either.

During F20 the business structure was re-organised
to better reflect the way the Group was being managed.
Effective from 1 July 2019, the management activities
of Middle, East and Africa are reported together with
Europe, collectively referred to as EMEA. Previously
the aforementioned regions were reported under Asia.
To facilitate comparability over reporting periods, as
comparatives have been re-stated to reflect the change
in management and monitoring responsibilities.

Segment results have also been restated for changes
to the Group’s accounting policies. Refer to note 32
for further information.

Presentation of segment results

Management EBITS
The principal profit metric for internal management
reporting is Management earnings before interest,
tax, SGARA and material items (EBITS). Corporate
charges are allocated to each segment on a proportionate
basis linked to segment revenue, head count or other
appropriate driver depending on the nature of the charge.

The identified reportable segments in the Group are below:

(i) Australia and New Zealand (ANZ)

This segment is responsible for the manufacture,
sale and marketing of wine within Australia and
New Zealand.

(ii) Europe, Middle, East and Africa (EMEA)

This segment is responsible for the manufacture,
sale and marketing of wine within Europe and
Middle, East & Africa.

(iii) Americas

This segment is responsible for the manufacture,
sale and marketing of wine within North America
and Latin America.

(iv) Asia

This segment is responsible for the sale and
marketing of wine within Asia (excluding the
Middle East and Africa).

72 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 2 – SEGMENT INFORMATION (CONTINUED)

2020

Total revenue
comprises:
Net sales revenue
Other revenue
Intersegment
revenue
Total segment
revenue (excl other
income/interest)

Management
EBITS
SGARA gain/(loss)
Material items

Management EBIT
Net finance costs
Consolidated
profit before tax

Depreciation of
property, plant
and equipment
and right-of-use
assets
Amortisation of
intangible assets
Assets held for sale
Capital
expenditure
(additions)
Segment assets
(excl intersegment
assets)
Segment liabilities
(excl intersegment
liabilities)

ANZ
$M

AMERICAS
$M

ASIA
$M

EMEA
$M

INTERSEGMENT
ELIMINATION
$M

TOTAL
SEGMENT
$M

UNALLOCATED/
CORPORATE
$M

CONSOLIDATED
$M

592.4
10.4

1,069.4 617.1
0.6

15.9

370.6
1.6

–
–

2,649.5
28.5

287.7

50.2

0.2

27.7

(365.8)

–

–
0.2

–

2,649.5
28.7

–

890.5

1,135.5 617.9

399.9

(365.8)

2,678.0

0.2

2,678.2

133.3
(43.5)
(25.8)

147.3 243.7
–
–

1.8
(8.0)

51.7
0.4
–

64.0

141.1 243.7

52.1

(52.6)

(79.8) (4.5)

(3.0)

(0.6)
–

(3.6)
74.3

–
–

(1.6)
–

(90.8)

(32.0) (1.2)

(1.4)

–
–
–

–

–
–

–

576.0
(41.3)
(33.8)

500.9

(42.5)
–
(2.8)

(45.3)

533.5
(41.3)
(36.6)

455.6
(85.9)

369.7

(139.9)

(3.8)

(143.7)

(5.8)
74.3

(14.9)
–

(20.7)
74.3

(125.4)

(24.3)

(149.7)

2,514.5

2,783.9 163.2

428.6

–

5,890.2

781.7

6,671.9

(348.4)

(819.0) (68.3)

(97.7)

–

(1,333.4)

(1,715.1)

(3,048.5)

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 73

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 2 – SEGMENT INFORMATION (CONTINUED)

20191

Total revenue
comprises:
Net sales revenue
Other revenue
Intersegment
revenue
Total segment
revenue (excl other
income/interest)

Management
EBITS1
SGARA gain/(loss)
Material items

Depreciation of
property, plant
and equipment
and right-of-use
assets1
Amortisation of
intangible assets
Assets held for sale
Capital
expenditure
(additions)
Segment assets
(excl intersegment
assets)1
Segment liabilities
(excl intersegment
liabilities)1

158.0
(9.8)
–

233.4 283.0
–
(10.2)
–
–

63.3
0.3
–

Management EBIT 148.2
Net finance costs
Consolidated
profit before tax1

223.2 283.0

63.6

(52.1)

(82.8)

(3.6)

(2.5)

(0.6)
–

(2.4)
78.3

–
–

(0.9)
–

(63.5)

(50.7)

(2.1)

(0.9)

ANZ
$M

AMERICAS
$M

ASIA
$M

EMEA
$M

INTERSEGMENT
ELIMINATION
$M

TOTAL
SEGMENT
$M

UNALLOCATED/
CORPORATE
$M

CONSOLIDATED
$M

602.3
32.7

1,134.4 721.4
1.1

15.3

373.5
2.1

–
–

2,831.6
51.2

347.5

45.8

0.3

34.7

(428.3)

–

–
0.2

–

2,831.6
51.4

–

982.5

1,195.5 722.8

410.3

(428.3)

2,882.8

0.2

2,883.0

–
–
–

–

–
–

–

737.7
(19.7)
–

718.0

(56.7)

–
–

(56.7)

(141.0)

(3.9)
78.3

(7.1)

(9.9)
–

681.0
(19.7)
–

661.3
(85.7)

575.6

(148.1)

(13.8)
78.3

(117.2)

(35.2)

(152.4)

2,505.1

2,841.3 223.0

370.9

–

5,940.3

701.2

6,641.5

(359.4)

(865.3) (57.9)

(95.0)

–

(1,377.6)

(1,622.4)

(3,000.0)

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

74 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 2 – SEGMENT INFORMATION (CONTINUED)

Geographical segments
The presentation of geographical net sales revenue is based on the location of the selling entity.

Australia
United States of America
United Kingdom
Other geographical locations2
Total

NET SALES REVENUE

2020
$M

1,180.4
1,080.3
286.4
102.4
2,649.5

2019
$M

1,295.7
1,147.3
298.1
90.5
2,831.6

2. Other than Australia, United States of America and the United Kingdom, sales of other countries are individually less than 10% of the

Group’s net sales revenue.

The presentation of non-current assets is based on the geographical location of the assets.

Australia
United States of America
United Kingdom
Other geographical locations
Total geographical non-current assets
Other non-current assets3
Consolidated non-current assets

3. Other non-current assets include financial derivative assets and deferred tax assets.

NOTE 3 – REVENUE

Revenue
Net sales revenue1
Other revenue
Total revenue

NON-CURRENT ASSETS

2020
$M

1,882.0
2,159.8
145.8
157.0
4,344.6
227.0
4,571.6

20191
$M

1,871.0
2,148.8
152.2
123.5
4,295.5
199.7
4,495.2

2020
$M

2019
$M

2,649.5
28.7
2,678.2

2,831.6
51.4
2,883.0

1. Net sales revenue is net of trade discounts and volume rebates.

Net sales revenue – types of products
The Group generates revenue through the sale of branded wines, principally as a finished, bottled product. The
Group’s wine portfolio includes some of the world’s leading Luxury, Masstige and Commercial wine brands such as
Penfolds, Beringer, Lindeman’s, Wolf Blass, 19 Crimes, Chateau St Jean, Beaulieu Vineyard, Sterling Vineyards
and Stags’ Leap.

The Group distributes wine to a range of customers across the world, with routes to market tailored by country.
Depending on the geography, wine is sold to distributors (who tend to be exclusive and stock a whole portfolio),
wholesalers (who choose which brands they would like to order from the portfolio), direct to national retail chains,
independent retailers and on-premise outlets. The Group also has some sales direct to the consumer.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 75

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 3 – REVENUE (CONTINUED)

Other revenue – types of services
The Group also provides contract bottling services to third parties.

Sales approach
For F20, the Group has one major customer in the Americas whose revenues represent 8.7% (F19: 9.6%) of reported
net sales revenue, and one major customer in Australia whose revenue represents 7.8% (F19: 7.1%) of reported net
sales revenue.

Financing components
The Group does not have any contracts where the period between the transfer of the promised product or services
to the customer and payment by the customer exceeds one year. Consequently, the Group does not adjust any of the
transaction prices for the time value of money.

Accounting policies
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts
collected on behalf of third parties. The Group’s contracts with customers generally include one performance obligation.
Revenue from the sale of products or services is recognised at the point in time when control over a product or service
is transferred to the customer, generally on delivery. The Group recognises revenue when it transfers control over a
product or service to a customer. Revenue is recorded net of sales discounts and rebates, duties and taxes. Payment
terms vary by customer. The following specific criteria are also applied:

Wine
Revenue is recognised in a manner that depicts transfer of control of goods to customers at the amount that reflects
consideration the business expects to be entitled to in exchange for those goods. Sales to national retail chains,
domestic distributors, independent retailers and on-premise outlets are usually recognised when goods are delivered.
Sales to international customers are recognised based on the international commercial terms the goods are shipped
under, but typically when goods are despatched. This is also the case for some national retail chains that manage
their own distribution networks.

Bottling services
Revenue is recognised when the relevant service has been completed.

Key estimate and judgement:

Trade discounts and volume rebates
Products are often sold with volume discounts and other rebates. Sales are recorded based on the consideration
specified in the sales contracts or terms, net of the estimated discount or rebate at the time of sale. These discounts
or rebates are considered variable consideration and are accounted for in determining the transaction price of a
contract. The method used by the Group to estimate discounts and rebates is the most likely amount. Accumulated
experience is used to estimate and provide for the discounts and rebates based on anticipated purchases.

76 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 4 – OTHER EARNINGS DISCLOSURES

Net foreign exchange gains / (losses)
Salaries and wages expense
Share based payments expense
Insurance and other income

Other gains and losses
Restructuring and redundancy expense1
(Write-down)/reversal of write-down of assets1
Net profit/(loss) on disposal of non-current assets
Total other gains and losses

1. Includes items classified as material items. Refer to note 5.

2020
$M

0.5
(404.1)
(10.9)
–

(40.7)
(16.0)
42.4
(14.3)

2019
$M

(1.7)
(412.4)
(18.9)
8.5

(24.1)
(8.8)
25.9
(7.0)

In F20 TWE received $0.5m in government support payments in Asia and the Americas, the majority of which has
been donated to local causes. TWE has not received, nor filed an application for JobKeeper support in Australia.

Accounting policies

Employee benefits
Employee benefits include wages, salaries, annual leave, bonuses, non-monetary benefits and share based payment
expenses. Further details of Group policy on measuring employee benefits are set out in note 16.

Superannuation
Employees are members of defined contribution superannuation schemes. Superannuation contributions are
recognised as an expense when they are due and payable.

Property, plant and equipment income
Revenue from the sale of property, plant and equipment is recognised when an executed contract becomes unconditional.

Other income
Revenue is recognised on an accruals basis in accordance with the substance of the relevant agreements.

Insurance income
Revenue is recognised when recovery is virtually certain.

NOTE 5 – MATERIAL ITEMS

The following individually material items are included within the consolidated statement of profit or loss and other
comprehensive income.

Individually material items included in profit before income tax:
Restructuring and redundancy costs
(Write-down)/reversal of write-down of assets
Total material items (before tax)
Tax effect of material items
Total material items (after tax)

2020
$M

(30.6)
(6.0)
(36.6)
10.4
(26.2)

2019
$M

–
–
–
–
–

In F20, material items reflect the restructure and review of commercial operations and assets in the Americas and the
costs pertaining to the long-term investment in Luxury winemaking infrastructure in South Australia. In F19, there
were no material items.

Material items
Material items are defined as those items of income or expense which have been determined as being sufficiently
significant by their size, nature or incidence and are disclosed separately to assist in understanding the Group’s
financial performance.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 77

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 6 – DIVIDENDS

Dividends declared and paid on ordinary shares
Final dividend for F19 of 20.0 cents per share 100% franked
(F18: 17.0 cents per share – 100% franked)2
Interim dividend for F20 of 20.0 cents per share 100% franked
(F19: 18.0 cents per share – 100% franked)3

Dividends approved after balance date
Since the end of the financial year, the Directors approved a final dividend of 8.0 cents per
share (F19: 20.0 cents) 100% franked (F19: 100% franked). This dividend has not been
recognised as a liability in the consolidated financial statements at year-end.

2020
$M

2019
$M

143.8

144.0
287.8

122.2

129.1
251.3

57.7

143.8

2. The F19 final dividend includes an amount of $3.7 million for shares issued under the Dividend Reinvestment Plan.
3. The F20 interim dividend includes an amount of $7.8 million (F19: $6.8 million) for shares issued under the Dividend Reinvestment Plan.

Details in relation to franking credits are included in note 23.

NOTE 7 – EARNINGS PER SHARE

Basic EPS
Basic EPS (cents) based on net profit attributable to members of Treasury Wine Estates Limited
Diluted EPS
Diluted EPS (cents) based on net profit attributable to members of Treasury Wine Estates Limited

Weighted average number of shares
Weighted average number of ordinary shares on issue used in the calculation
of basic EPS (in thousands)
Effect of potentially dilutive securities
Deferred shares (in thousands)
Weighted average number of ordinary shares on issue used in the calculation
of diluted EPS (in thousands)

Earnings reconciliation
Basic and diluted EPS
Net profit
Net profit attributable to non-controlling interests
Net profit attributable to members of Treasury Wine Estates Limited
used in calculating basic and diluted EPS

2020
CENTS PER
SHARE

20191
CENTS PER
SHARE

36.2

56.9

56.6

NUMBER

719,893

718,419

1,460

3,516

721,353

721,935

260.8
–

260.8

408.5
–

408.5

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

78 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 7 – EARNINGS PER SHARE (CONTINUED)

Calculation of earnings per share
Earnings per share (EPS) is the amount of post-tax profit attributable to each share.

Basic EPS is calculated by dividing the net profit after income tax attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year.

Diluted EPS is determined by dividing the profit attributable to ordinary shareholders after tax by the weighted
average number of ordinary shares outstanding during the period, adjusted for the effects of dilutive potential
ordinary shares in the employee Long-Term Incentive Plan and Restricted Equity Plan (see note 22).

NOTE 8 – NET CASH FLOWS FROM OPERATING ACTIVITIES

Reconciliation of net cash flows from operating activities to profit after income tax

Profit for the year
Depreciation and amortisation
SGARA loss
Write-down/(reversal of write-down) of assets
Net profit on disposal of non-current assets
Share based payments expense
Other

Net cash provided by operating activities before change in assets and liabilities

Change in working capital and tax balances, net of effects from
acquisition/disposal of controlled entities

Receivables
Inventories
Derivative financial assets/liabilities
Payables
Net tax balances
Provisions

Net cash flows from operating activities

2020
$M

260.8
164.4
41.3
16.0
(42.4)
10.9
(2.9)
448.1

69.7
(38.0)
(0.4)
(42.6)
(59.1)
11.1
388.8

20191
$M

408.5
161.9
19.7
8.8
(25.9)
18.9
(3.6)
588.3

(70.3)
(115.8)
(2.3)
5.6
54.6
1.8
461.9

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 79

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
WORKING CAPITAL
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 9 – WORKING CAPITAL

Current
Cash and cash equivalents
Receivables (a)
Inventories (b)
Trade and other payables
Total current

Non-current
Inventories (b)
Total non-current

(a) Receivables

Current
Trade receivables
Allowance for expected credit loss
Other receivables
Prepayments
Total current receivables

(b) Inventories

Current
Raw materials and stores
Work in progress
Finished goods
Total current inventories

Non-current
Work in progress
Finished goods
Total non-current inventories

Total inventories

2020
$M

20191
$M

449.1
553.5
1,017.4
(682.1)
1,337.9

401.8
661.3
1,001.7
(718.6)
1,346.2

1,059.2
1,059.2

1,045.6
1,045.6

2020
$M

478.2
(9.6)
45.2
39.7
553.5

2019
$M

545.8
(2.6)
91.4
26.7
661.3

2020
$M

2019
$M

66.6
459.3
491.5
1,017.4

744.1
315.1
1,059.2

60.7
415.8
525.2
1,001.7

830.0
215.6
1,045.6

2,076.6

2,047.3

Inventories of wine stocks are classified between current and non-current based on sales projections for the ensuing
year. Inventories recognised as an expense during the year and included in cost of sales amounted to $1,511.7 million
(F19: $1,571.8 million). In F20, the write-down of inventories to net realisable value amounted to $21.0 million
(F19: $15.4 million). The reversal of write-downs amounted to $1.2 million (F19: $12.2 million). These amounts
are included in cost of sales.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

80 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 9 – WORKING CAPITAL (CONTINUED)

Accounting policies

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits held at call with banks, cash in transit, short-term
deposits and investments with maturities of three months or less.

Cash assets and cash liabilities are offset and presented as a net amount in the consolidated statement of financial
position when the Group has a legally enforceable right to offset or intent to settle on a net basis.

For the purposes of the consolidated statement of cash flows, cash and cash equivalents are disclosed net
of outstanding bank overdrafts.

Receivables
Trade receivables are initially recognised at invoice value (fair value) and subsequently measured at amortised cost,
less an allowance for expected credit losses.

Credit terms are generally between 30 – 120 days depending on the nature of the transaction. Expected credit losses
are calculated by utilising a provision matrix where loss rates are calculated based on days past due for groupings
of various customer segments that have similar loss patterns (for example geography, product type and rating).
The provision matrix is initially determined by the Group’s historical observed loss rates and calibrated for forward
looking information. Loss rates will be updated at each reporting date based on changes in observed default rates and
changes in forward looking information.

Inventories
Inventories are valued at the lower of their cost (using average or FIFO basis) or estimated net realisable value.

The cost of raw materials is their purchase price or, in the case of grapes sourced from Group owned vineyards,
fair value (see note 12 for further details). The cost of manufactured goods is determined on a consistent basis
and is made up of the raw materials and direct labour used in manufacture. It also includes other direct costs
and related production overheads based on normal operating capacity.

Net realisable value represents the estimated selling price in the ordinary course of business less estimated costs
of completion and estimated costs to be incurred in marketing, selling and distribution.

Trade and other payables
Trade and other payables including accruals are recorded when the Group is required to make future payments
as a result of purchases of goods or services. Trade and other payables are carried at amortised cost.

Key estimates and judgements:

Trade discounts and volume rebates
Key estimates relate to the amount accrued for discounts and rebates. Products are often sold with trade discounts
and volume rebates. Sales are recorded based on the price specified in the sales contracts or terms, net of the
estimated discount or rebate at the time of sale. Accumulated experience is used to estimate and provide for the
discounts and rebates based on anticipated purchases and depletions.

Net realisable value of inventory
The period over which some wine inventories are converted from raw materials to finished goods can be a significant
length of time. Failure to forecast demand effectively may result in excess inventories or missed revenue opportunities.

Forecast demand and market prices can vary significantly over the holding period up to the likely date of sale.
Estimating the most likely conditions at the expected point of sale is therefore more challenging over the longer term.
Non-current inventory is $1,059.2 million (F19: $1,045.6 million) and its estimated selling price is therefore a key estimate.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 81

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT

FREEHOLD
BUILDINGS

LEASEHOLD
BUILDINGS

PLANT AND
EQUIPMENT

TOTAL

LAND

2019
$M

2020
$M

2019
$M

381.6
–

383.5
–

509.9
–

496.4
–

2020
$M

44.4
–

20191
$M

43.3
–

2020
$M

2019
$M

2020
$M

20191
$M

1,803.9 1,828.1
82.1

128.2

2,739.8 2,751.3
82.1

128.2

(41.7)

(41.6)

(256.6)

(246.0)

(23.7)

(21.0)

(1,148.6) (1,154.9)

(1,470.6) (1,463.5)

339.9

341.9

253.3

250.4

20.7

22.3

783.5

755.3

1,397.4 1,369.9

341.9
3.3
9.7

355.3
14.2
–

250.4
7.0
3.1

242.4
16.2
–

22.3
0.7
–

17.2
8.4
–

755.3
108.8
4.0

771.4
81.6
–

1,369.9 1,386.3
120.4
–

119.8
16.8

(15.9)

(14.0)

(0.2)

(5.4)

6.4
(9.0)

–

(23.5)

(0.1)
–

–
–

–
(0.3)

(1.4)
(8.7)

–
(0.8)

–
(8.7)

–

–
–

(0.3)

(3.0)

(17.5)

(19.1)

(37.2)

–
–

(6.4)
(6.2)

(4.5)
(70.4)

–
(27.5)

0.3
(73.9)

–
(15.5)

(6.0)
(81.7)

–
(51.8)

0.3
(86.4)

–
(2.6)

–
(3.8)

3.6

9.9

3.4

6.7

0.3

0.8

5.9

20.9

13.2

38.3

339.9

341.9

253.3

250.4

20.7

22.3

783.5

755.3

1,397.4 1,369.9

Cost
Projects in Progress
Accumulated
depreciation and
impairment
Carrying amount
at end of year

Reconciliations
Carrying amount
at start of year
Additions
Business acquisition
(Transfer to)/from
Assets held for sale
(Transfer to)/from other
asset classes
Disposals
(Write-downs)/
write-downs reversal
Depreciation expense
Foreign currency
translation
Carrying amount
at end of year

Included within plant and equipment are ‘Projects in Progress’ of $128.2 million (F19: $82.1 million), which are assets
under construction and therefore not yet depreciated. The cost of construction includes the cost of materials used
in construction, direct labour on the project, and an allocation of overheads. The Group recognised $6.0 million
write-downs (F19: $0.3 million write-down reversal) for property, plant and equipment during the year.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

82 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Accounting policies
Property, plant and equipment is initially recorded at cost and then reduced by accumulated depreciation and any
impairment losses.

Plant and equipment is depreciated so that the assets are written down to their residual value over their useful lives,
using a reducing balance or straight-line method depending on the nature of the asset. Assets that relate to leases
are written-off over the period of the lease or useful life, whichever is the shorter. Residual values, useful lives and
amortisation methods are reviewed annually and adjusted when required.

Depreciation expense is included in ‘costs of sales’, ‘selling expenses’ and ‘administration expenses’ in the consolidated
statement of profit or loss and other comprehensive income.

The depreciation rates used for each class of asset are as follows:

Freehold buildings
Leasehold buildings
Plant and equipment

1.5% – 10.0%
10.0% – 20.0%
3.3% – 40.0%

Costs incurred in maintaining agricultural assets are recognised as an expense as incurred.

Derecognition and disposal
When an asset is sold, scrapped or is no longer of use to the business it is derecognised. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net proceeds and the carrying amount of the asset)
is recorded in the period the asset is derecognised in the consolidated statement of profit or loss and other
comprehensive income.

Vineyard resources

Australia
United States
New Zealand
Italy

2020
HECTARES

2019
HECTARES

8,676
3,213
498
193
12,580

8,651
3,728
498
148
13,025

The area under vine shown above:

• Includes 3,263 hectares (F19: 3,317 hectares) under direct leasing arrangements and 10 hectares (F19: 7 hectares)

of olive groves in Tuscany, a region of Italy.

• Yielded 76,881 tonnes of grapes (F19: 94,292 tonnes).

Harvests generally occur in September – October in the Northern Hemisphere and February – May in the
Southern Hemisphere.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 83

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 11 – RIGHT-OF-USE ASSETS

The Group has adopted AASB 16 Leases retrospectively from 1 July 2019 and has restated comparatives for the 2019
reporting period. For adjustments recognised on adoption of AASB 16 Leases, refer to note 32.

The Group has leases for vineyards, buildings, equipment and motor vehicles. The Group’s lease arrangements have
durations up to 25 years but may have extension options as described in (d) below.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and
short-term leases, including IT equipment and oak barrels. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the lease term.

(a) Right-of-use assets

Cost
Accumulated depreciation
and impairment
Carrying amount
at end of year

Reconciliations
Carrying amount
at start of year
Additions
Disposals
Depreciation and
impairment expense
Foreign currency
translation
Carrying amount
at end of year

LAND

2019
$M

2020
$M

LEASEHOLD
BUILDINGS

2020
$M

2019
$M

498.2

482.3

249.0

236.1

PLANT AND
EQUIPMENT

2020
$M

45.1

2019
$M

41.3

TOTAL

2019
$M

2020
$M

792.3

759.7

(173.9)

(146.2)

(75.8)

(57.1)

(25.6)

(20.5)

(275.3)

(223.8)

324.3

336.1

173.2

179.0

19.5

20.8

517.0

535.9

336.1
11.2
–

315.0
31.4
–

179.0
29.4
(7.6)

121.1
76.7
–

20.8
8.6
–

19.9
9.7
–

535.9
49.2
(7.6)

456.0
117.8
–

(28.6)

(23.0)

(30.9)

(23.9)

(10.1)

(9.2)

(69.6)

(56.1)

5.5

12.7

3.4

5.1

0.2

0.4

9.1

18.2

324.2

336.1

173.3

179.0

19.5

20.8

517.0

535.9

(b) Amounts recognised in the statement of profit or loss and other comprehensive income

Expenses relating to variable lease payments not included in lease liabilities
Interest expense on lease liabilities
Expenses relating to low-value leases, excluding short-term leases of low-value items
Expenses relating to short-term leases

Total cash out flow for lease liabilities

2020
$M

135.0
39.7
31.0
0.2

2020
$M

95.1

2019
$M

188.3
37.5
18.9
0.1

2019
$M

85.1

(d) Extension options
Some property and vineyard leases contain extension options exercisable by the Group up to the end of the non-
cancellable contract period. These options are used to provide operational flexibility across the Group. The extension
options held are exercisable only by the Group and not the lessors. The Group has estimated that the potential future
lease payments, should it exercise the extension option, would result in an increase lease liability of $811.0 million
(F19: $796.9 million).

84 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 11 – RIGHT-OF-USE ASSETS (CONTINUED)

(e) Variable lease payments
Certain contractual arrangements may contain both lease and non-lease components. Non-lease components are
distinct elements of a contract that are not related to securing the use of the leased asset, such as inventory, common
area maintenance, and other management costs. The Group has elected to measure the amount disclosed in relation
to variable leases for these arrangements by combining the lease and non-lease components.

Certain leases include variable lease payments, including payments that depend on an index or rate, as well as variable
payments for items such as grapes, labour, property taxes, insurance, maintenance, and other operating expenses
associated with leased assets. Certain grape purchasing arrangements include variable payments based on actual
tonnage and price of grapes that will vary depending on certain factors, including weather, time of harvest, overall market
conditions, and the agricultural practices and location of the vineyard. Such variable lease payments are excluded from
the calculation of the right-of-use asset and are recognised in the period in which the obligation is incurred.

Accounting policies
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses
the definition of a lease in AASB 16 Leases.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease
incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the
end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease
term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the
right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same
basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by
impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the

commencement date;

• amounts expected to be payable under a residual value guarantee; and

• the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an
optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate
of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it
will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.

The Group presents right-of-use assets as ‘right-of-use assets’ and lease liabilities in ‘borrowings’ in the consolidated
statement of financial position.

Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and
short-term leases, including IT equipment and oak barrels. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the lease term.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 85

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 11 – RIGHT-OF-USE ASSETS (CONTINUED)

Key estimate and judgement:

Right-of-use assets
The Group has a applied judgement in determining the interest rates used in the discount rate and in determining the
term of a lease, which is based on the likelihood of the Group’s ability to renew the lease and having regard for terms
equivalent to those that currently exit.

NOTE 12 – AGRICULTURAL ASSETS

Agricultural assets
Total agricultural assets

Reconciliations
Carrying amount at start of year
Fair value increase
Transfers to inventory
Foreign currency translation
Carrying amount at end of year

2020
$M

34.1
34.1

29.4
34.1
(29.9)
0.5
34.1

2019
$M

29.4
29.4

41.3
29.4
(41.9)
0.6
29.4

Grape growing and sourcing
The Group has a variety of sources of fruit including owned and leased vineyards, contracted growers and the bulk
wine market.

This approach provides flexibility through the economic cycle and assists with managing the risks arising from
agricultural factors beyond the Group’s control such as pests, disease and extreme weather conditions.

The Group’s owned vineyards ensure access to super premium fruit from key viticultural regions including the
Barossa Valley and Coonawarra in Australia, Marlborough in New Zealand and the Napa and Sonoma Valleys
in California. These vineyards contribute to some of the Group’s most prestigious wines.

Accounting policies
The agricultural assets of the Group (i.e. grapes) are measured at their fair value, less estimated point of sale costs.

The fair value adjustment during the year is recognised within ‘Other expenses’ in the consolidated statement
of profit or loss and other comprehensive income.

Harvested grapes are transferred to inventory initially at fair value and are then subsequently accounted for in the
cost of inventory (see note 9).

Fair value determination
The valuations of agricultural assets are Level 2 fair value measurements under the Group’s accounting policy
(see note 1), with the principal inputs being:

Grapes prior to harvest
Estimated based on the expected yields per hectare, estimated harvest costs and the anticipated market price of grapes.

Harvested grapes
Determined by reference to the weighted district average of grape prices for each region for the current vintage.
Prices vary with the grade quality of grapes produced in each region.

Key estimate and judgement:

Fair value of grapes
Key to estimating the value of grapes is the following:

• Yield estimates were higher/(lower);

• The estimated harvest costs were lower/(higher);

• Market prices for grapes were higher/(lower); or

• The quality of grapes, including the impacts on harvested grapes of weather, agricultural practices

and location of the vineyard were higher/(lower).

86 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 13 – INTANGIBLE ASSETS

Cost
Projects in progress at cost
Accumulated amortisation
and impairment
Carrying amount at end of year

Reconciliations
Carrying amount at start of year
Additions
Business acquisitions
(Transfers to)/from assets held for sale
Amortisation expense
Foreign currency translation
Carrying amount at end of year

BRAND NAMES
AND LICENCES

2020
$M

2019
$M

1,462.1 1,446.3
–

–

IT
DEVELOPMENT
COSTS

GOODWILL1

TOTAL

2020
$M

119.3
49.4

2019
$M

94.2
44.3

2020
$M

903.8
–

2019
$M

2020
$M

2019
$M

899.8 2,485.2 2,440.3
44.3

49.4

–

(509.7)
952.4

(499.2)
947.1

(72.8)
95.9

(55.8)
82.7

(620.5)
283.3

(620.7)
279.1

(1,203.0) (1,175.7)
1,331.6 1,308.9

947.1
–
–
–
(3.5)
8.8
952.4

937.8
–
–
(11.7)
(1.8)
22.8
947.1

82.7
29.9
–
–
(17.2)
0.5
95.9

62.0
32.0
–
–
(12.0)
0.7
82.7

279.1
–
3.8
–
–
0.4
283.3

274.2
–
–
–
–
4.9
279.1

1,308.9 1,274.0
32.0
–
(11.7)
(13.8)
28.4
1,331.6 1,308.9

29.9
3.8
–
(20.7)
9.7

Goodwill is allocated to the Cash Generating Units (CGUs) or group of CGUs (see note 15 for further details) that
are expected to benefit from the synergies of the combination. The allocation of intangible assets (other than IT
development costs) is as follows:

ANZ

2019
$M

2020
$M

AMERICAS

EUROPE

TOTAL

2020
$M

2019
$M

2020
$M

2019
$M

2020
$M

2019
$M

181.5
–
(0.9)
180.6

180.0
–
1.5
181.5

76.9
–
1.2
78.1

73.7
–
3.2
76.9

480.8
–
(1.5)
–
(0.1)
479.2

481.4
–
(0.8)
–
0.2
480.8

462.9
–
(2.0)
–
8.9
469.8

453.2
–
(1.0)
(11.7)
22.4
462.9

20.7
3.8
0.1
24.6

3.4
–
–
–
–
3.4

20.5
–
0.2
20.7

3.2
–
–
–
0.2
3.4

279.1
3.8
0.4
283.3

947.1
–
(3.5)
–
8.8
952.4

274.2
–
4.9
279.1

937.8
–
(1.8)
(11.7)
22.8
947.1

Goodwill1
Carrying amount at start of year
Business acquisitions
Foreign currency translation
Carrying amount at end of year

Brand names and licences
Carrying amount at start of year
Additions
Amortisation expense
(Transfers to)/from assets held for sale
Foreign currency translation
Carrying amount at end of year

Key estimate and judgement:

Useful life of brand names
In assessing whether a brand has a finite or indefinite useful life, the Group makes use of information on the long-term
strategy for the brand, the level of growth or decline of the markets that the brand operates in, the history of the market
and the brand’s position within that market.

If a brand is assessed to have a finite life, the Group will use judgement in determining the useful life of the brand
including the period over which expected cash flows will continue to be derived in making that decision.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 87

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 13 – INTANGIBLE ASSETS (CONTINUED)

Accounting policies

Brand names and licences
Brand names are recognised as assets when purchased individually and (primarily) as part of the allocation
of the purchase price when the Group acquires other businesses. Internally generated brand names are not
capitalised and expenditure incurred in developing, maintaining or enhancing brand names is charged to profit
or loss in the year incurred.

Brand names are initially recognised at cost when purchased individually and at fair value when acquired with
a business. This fair value is determined by reference to independent valuations.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any
accumulated impairment losses.

Goodwill
Goodwill arises on the acquisition of businesses and represents the difference between the purchase price and share
of the net assets of the acquired business, recorded at fair value.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not
amortised but is tested for impairment at least annually (see note 15).

IT development and software
Costs incurred in developing information technology (IT) products or systems and costs incurred in acquiring
software and multi-year licenses are capitalised as intangible IT assets. They include the cost of purchased software
and internal labour and contractors used in the development of software.

IT assets are carried at cost less any accumulated amortisation and are amortised over their expected useful life
(2-10 years) on a straight-line basis. Amortisation is included in ‘Other expenses’ in the consolidated statement
of profit or loss and other comprehensive income.

NOTE 14 – ASSETS AND DISPOSAL GROUPS HELD FOR SALE

Assets and disposal groups held for sale
Total assets and disposal groups classified as held for sale

2020
$M

74.3
74.3

2019
$M

78.3
78.3

Assets held for sale comprise property, plant and equipment and related deferred tax assets and liabilities identified
by the Group to be recovered through sale.

Management are committed to a plan to sell a vineyard and a wine making facility, including its related property,
plant and equipment, inventory and intangible assets within America. Accordingly, that vineyard and facility has
been presented as a disposal group held for sale.

Impairment losses relating to the disposal group
Impairment losses of Nil million (F19: $6.3 million) for the write down of the disposal group to the lower of its
carrying amount and its fair value less costs to sell have been included in ‘other expenses’ in the consolidated
statement of profit or loss and other comprehensive income. Refer to note 4 for other earnings disclosures.

Accounting policies
Non-current assets are classified as held for sale if their value will be recovered principally through their sale, rather
than through ongoing use within the business.

Assets are not depreciated or amortised while they are classified as held for sale. They are valued at the lower of their
carrying amount and fair value less costs to sell with an impairment loss recognised for any difference. A gain is
recognised for any subsequent increase in value, but not in excess of any cumulative impairment loss previously
recognised. Any gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at
that point. The fair values of the assets based on independent market appraisals exceed the assets’ carrying values.

88 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 15 – IMPAIRMENT OF NON-FINANCIAL ASSETS

In F20 the recoverable amounts of cash generating units (CGUs) exceed their carrying values and as a result no
impairment has been recognised (F19: Nil). There were no indications that previously recognised impairment losses
should be reversed (F19: Nil). The recoverable amount was determined through a value in use calculation.

The Group’s CGUs are consistent with the prior period and are:

• Americas;

• Europe; and

• Australia and New Zealand (ANZ).

Accounting policies

Timing of Impairment Testing
The Group tests property, plant and equipment and intangible assets for impairment:

• At least annually for goodwill and indefinite life brands; and

• Where there are indications that an asset may be impaired; or

• Where there is an indication that previously recognised impairments may have changed.

Impairment losses are recognised in the consolidated statement of profit or loss and other comprehensive income.

Approach to Impairment Testing
If the asset does not generate independent cash inflows and its value in use cannot be estimated to be close to its fair
value, the asset is tested for impairment as part of the CGU to which it belongs.

When an asset’s (or CGU’s) carrying value exceeds its recoverable amount, it is impaired. Recoverable amount is the
higher of the asset’s (or CGU’s) fair value less costs of disposal or value in use.

Fair value is determined in accordance with the accounting policy set out in note 1.

In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

Reversals of Impairment
If there is an indicator that a previously recognised impairment loss no longer exists or has decreased, recoverable
amount is estimated. If there has been a change in the estimates used to determine an asset’s recoverable amount
since an impairment loss was recognised, the carrying value of the asset is increased to its recoverable amount
(limited to the amount that would have been determined, net of depreciation, had no impairment loss been recognised
for the asset in prior years).

Any reversal is recognised in the consolidated statement of profit or loss and other comprehensive income with an
adjustment to depreciation in future periods to allocate the asset’s revised carrying value, less any residual value,
on a systematic basis over its remaining useful life. The Group does not reverse impairments recognised for goodwill.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 89

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 15 – IMPAIRMENT OF NON-FINANCIAL ASSETS (CONTINUED)

Key estimate and judgement:

Impairment testing key assumptions
The Group has estimated recoverable amount based on value in use at 30 June 2020. Key estimates and
judgements include:

Cash flow forecasts
Cash flow forecasts are based on the Group’s most recent five-year financial plans approved by the Board. Key
assumptions in the cash flow forecasts include sales volume growth, cost of sales and cost of doing business.

The Group’s assumptions regarding sales volume growth and costs of doing business are based on expectations of the
market demand and past experience. The assumption on cost of sales is based on expectation about future vintage
costs which assume continuity of sourcing and access to fruit.

These estimates, judgements and assumptions are based on forecasts of economic conditions which reflect expectations
and assumptions as at 30 June 2020 about future events that the Directors believe are reasonable in the circumstances.

Long-term growth rates
Cash flow forecasts beyond a five-year period are extrapolated using a growth rate range of 2.0% to 3.0%
(F19: 2.0% to 3.0%). Growth rates are specific to individual CGUs and reflect expected future market and
economic conditions.

Discount rates
The Group applies a post-tax discount rate to post-tax cash flows as the valuation calculated using this method closely
approximates applying pre-tax discount rates to pre-tax cash flows. The post-tax discount rates incorporate a risk-
adjustment relative to the risks associated with the net post-tax cash flows being achieved. The following pre-tax
discount rates were applied:

Americas
Europe
ANZ

2020

9.4%
9.5%
11.0%

2019

10.0%
9.6%
11.8%

Exchange rates
Cash flow forecasts in foreign currency are forecast in that currency and discounted using the applicable regional
discount rates (predominantly USD and GBP).

Sensitivity analysis
Increases in discount rates or changes in other key assumptions, such as operating conditions or financial performance,
may cause the recoverable amount to fall below carrying values.

For the Americas CGU, a reduction in cash flow forecasts of more than 20% for all years in the forecast period and also
in the terminal year would reduce the CGU’s headroom to nil. There are no reasonably possible changes in the discount
rate that would result in an impairment.

For the Group’s remaining CGUs, based on current economic conditions and CGU performances, there are no
reasonably possible changes to key assumptions used in the determination of CGU recoverable amounts that would
result in an impairment to the Group.

90 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 16 – PROVISIONS

Current
Employee entitlements
Other
Total current provisions

Other provisions

2020
Carrying amount at start of year
Charged/(credited) to profit or loss
Payments
Foreign currency translation
Carrying amount at end of year

2020
$M

42.7
11.2
53.9

20191
$M

36.1
7.5
43.6

ONEROUS
CONTRACTS
$M

RESTRUCTURING
$M

OTHER
$M

TOTAL
$M

1.4
3.6
(1.5)
0.1
3.6

5.3
14.7
(12.9)
(0.1)
7.0

0.8
(0.2)
–
–
0.6

7.5
18.1
(14.4)
–
11.2

Onerous contract provisions are held for IT infrastructure and service contracts that have been identified as being
surplus to the Group’s needs. The restructuring provision comprises costs in relation to the Group’s rationalisation
and restructure program.

Accounting policies
Provisions are recognised for present obligations (legal, equitable or constructive) to make future payments (or other
transfer of value) to other entities due to past transactions or events. They are recognised only when it is probable the
liability will arise and when a reliable estimate can be made of the amount.

If the effect of time value of money is material, provisions are determined by discounting the expected future cash
flows at a pre-tax risk-free rate plus, where appropriate, the risks specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognised as a finance cost.

Employee entitlements
Liabilities for employees’ entitlements to wages and salaries, annual leave and other current employee entitlements
(that are expected to be paid within 12 months) are measured at amounts expected to be paid as at the reporting date.

Liabilities for other employee entitlements, which are not expected to be paid or settled within 12 months of reporting
date, are accrued in respect of all employees at the present value of future amounts expected to be paid.

Restructuring
Restructuring provisions are recognised at the point when a detailed plan for the restructure has been developed
and implementation has commenced. The cost of restructuring provided is the estimated future cash flows, discounted
at the appropriate rate which reflects the risks of the cash flow.

Termination benefits are payable when employment is terminated before the normal retirement date or whenever
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits
when it is demonstrably committed to either terminating the employment of a current employee according to a detailed
formal plan without possibility of withdrawal or upon the provision of an offer to encourage voluntary redundancy.

Onerous contracts
Onerous contracts are measured at the lower of the expected cost of terminating the contract and the expected net
cost of continuing with the contract (discounted to present value if material).

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 91

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 17 – CAPITAL MANAGEMENT

The Group considers capital to be the combination of shareholders’ equity, reserves and net debt. The key objectives
of the Group’s approach to capital management include:

• Safeguard the Company’s ability to continue as a going concern;

• Maintaining a credit profile and the requisite financial metrics that secures access to funding with a spread

of maturity dates and sufficient undrawn committed facility capacity;

• Optimising over the long term, and to the extent practicable, the weighted average cost of capital to reduce the

Group’s cost of capital while maintaining financial flexibility; and

• To provide returns to shareholders and benefits to other stakeholders.

In order to optimise the Group’s capital structure and in line with the Group’s strategic objectives and operating plans,
the Company may:

• Alter the amount of dividends paid to shareholders;

• Return capital to shareholders;

• Issue new shares;

• Vary discretionary capital expenditure;

• Draw-down additional debt; or

• Sell assets to reduce debt.

Various financial ratios and internal targets are assessed and reported to the Board on a regular basis by management
to monitor and support the key objectives set out above. These ratios and targets include:

• An earnings to net interest expense ratio;

• A total net indebtedness to earnings before interest, tax, depreciation, amortisation and self-generating and

regenerating assets ratio; and

• Group debt maturity profile.

NOTE 18 – BORROWINGS

Total borrowings consist of:
Current
Non-current
Total borrowings

Details of major arrangements

2020
$M

20191
$M

223.3
1,702.3
1,925.6

67.3
1,727.3
1,794.6

US Private Placement Notes and Debt Facilities
US Private Placement (USPP) notes totalling US$400.0 million (unsecured) are outstanding, with maturities
ranging from December 2020 to June 2029. The carrying value of USPP notes at 30 June 2020 is $581.9 million
(F19: $571.0 million).

During F20 the Group established a US$200.0 million syndicated debt facility maturing in October 2021. Syndicated
debt facilities now total US$550.0 million, with US$200.0 million maturing in October 2021, US$120.0 million
maturing November 2023 and US$230.0 million maturing in November 2026. At 30 June 2020 syndicated debt
facilities of US$350.0 million are drawn against the November 2023 and 2026 maturities. The carrying value of the
syndicated debt facility at 30 June 2020 is $509.2 million (F19: $499.6 million).

The Group has in place several revolving bank debt facilities with maturities staggered through to December 2024.
As at 30 June 2020 there are $100.0 million drawn under the bank debt facilities (F19: nil).

USPP notes bear interest at fixed and floating interest rates. In accordance with the Group’s risk management
strategy, the Group has entered into a combination of fixed to floating and floating to fixed interest rate swaps
to obtain the desired fixed/floating interest ratio, with interest rate collars also used to manage interest rate risk.
Refer to note 24 for further details.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

92 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 18 – BORROWINGS (CONTINUED)

Financial guarantees
The Group has issued financial guarantees to other persons of $23.4 million (F19: $23.0 million) that could be
called upon at any time in the event of a breach of the Group’s financial obligations. No payments are expected
to eventuate under these financial guarantees as the Group expects to meet its respective obligations to the
beneficiaries of these guarantees.

Lease liabilities
The Group enters into Lease arrangements that meet the capitalisation requirements under AASB 16 Leases.
Current and non-current lease liabilities are recognised for the present value of the lease payments due under
the lease contracts and are represented as borrowings.

At 30 June 2020, the Group recognised current lease liabilities of $56.1 million (30 June 2019: $55.2 million) and
non-current lease liabilities of $642.5 million (30 June 2019: $649.4 million). The Group’s lease arrangements have
durations up to 25 years.

Receivables purchasing agreement
The Group has entered into an uncommitted non-recourse receivable purchasing agreement to sell certain domestic
and international receivables, from time to time, to an unrelated entity in exchange for cash. As at 30 June 2020,
receivables totalling $26.8 million had been derecognised under this arrangement (F19: $26.2 million).

Accounting policies
Borrowings are initially recorded at fair value of the consideration received, net of directly attributable costs.

After initial recognition, borrowings are measured at amortised cost, using the effective interest rate method.
Amortised cost is calculated by considering any issue costs, and any discount or premium on issuance.
Gains and losses are recognised in the statement of profit or loss and other comprehensive income if borrowings
are derecognised.

ALL BALANCES TRANSLATED TO AUD

TOTAL CASH
FLOWS
FROM
ACTIVITIES
$M

20191
$M

ADDITIONS
TO NET
DEBT
$M

DEBT
REVALUATION
AND FX
MOVEMENTS
$M

Net debt
Cash and cash equivalents
Loan receivable
Bank loans2
US Private Placement Notes (net of fair value hedge)
Lease liabilities
Other loan payable
Net debt

401.8
0.7
(492.7)
(571.0)
(704.6)
(14.2)
(1,380.0)

47.8
(0.1)
(101.2)
–
59.1
13.4
19.0

–
–
(4.9)
–
(41.3)
–
(46.2)

(0.5)
–
(3.8)
(10.9)
(11.8)
–
(27.0)

2020
$M

449.1
0.6
(602.6)
(581.9)
(698.6)
(0.8)
(1,434.2)

2. Loans are stated net of capitalised facility finance costs. At reporting date, the balance of bank loans is $609.2 million

(F19: $499.6 million) against capitalised facility finance costs of $6.6 million (F19: $6.9 million) to be amortised over the facility period.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 93

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 19 – CONTRIBUTED EQUITY

Issued and paid-up capital
720,800,351 (F19: 719,100,485) ordinary shares, fully paid
Own shares held

Contributed equity at the beginning of the period
Shares movements:
1,055,717 shares issued under the Dividend reinvestment plan (F19: 436,939)
644,149 shares issued for vested Long Term Incentive Plans (F19: Nil)
Net movement in own shares held
Contributed equity at the end of the period

The shares have no par value.

2020
$M

2019
$M

3,269.8
–
3,269.8

3,247.3
(3.5)
3,243.8

3,243.8

3,235.4

11.5
11.0
3.5
3,269.8

6.8
–
1.6
3,243.8

Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held. Ordinary shares entitle their holder to one vote,
either in person or by proxy, at a meeting of the Company. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax from the proceeds.

Purchase of shares for LTIP plans
The Group engages a third party to purchase shares in the Company to be used to satisfy share-based payment
obligations upon vesting under the Group’s Employee Equity Plans. Historically, such commitments were satisfied by
way of treasury share purchases (i.e. the Group acquiring shares on market directly). There are no treasury shares
held at 30 June 2020.

During the period, the Group purchased 0.3 million shares ($4.9 million) under the third-party arrangement
(F19: 0.9 million shares ($16.6 million)). A total of 0.2 million shares (F19: 0.9 million) purchased under the
third-party arrangement are available at 30 June 2020. Nil treasury shares (F19: 0.3 million) are available
at 30 June 2020.

NOTE 20 – COMMITMENTS

Details of the Group’s lease commitments are captured in Lease Liabilities disclosure within Borrowings (note 18)
and the impact of short-term and low value leases is captured in note 11.

Capital expenditure and other commitments
The following expenditure has been contracted but not provided for in the financial statements:
Capital expenditure

2020
$M

2019
$M

45.5

49.2

94 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 21 – RESERVES

Cash flow hedge reserve
Share based payments reserve
Foreign currency translation reserve
Total reserves

2020
$M

(20.0)
(54.6)
86.6
12.0

2019
$M

(8.4)
(34.6)
72.1
29.1

Cash flow hedge reserve
This reserve records the effective portion of gains or losses from open cash flow hedges.

Share based payment reserve
This reserve records amounts offered to employees under Long-term Incentive Plan (LTIP), Restricted Equity Plan
(REP), deferred Short-term Incentive Plan (STIP) and Share Cellar plan.

Foreign currency translation reserve
This reserve holds exchange differences arising on translation of foreign subsidiaries, as described in note 1.

NOTE 22 – EMPLOYEE EQUITY PLANS

STIP
(RESTRICTED
SHARES)

MTIP
(PERFORMANCE
RIGHTS)

LTIP
(PERFORMANCE
RIGHTS)

REP
(RESTRICTED
SHARES/
DEFERRED
SHARE RIGHTS)

SHARE CELLAR
(BROAD-BASED
EMPLOYEE
SHARE PLAN)

Outstanding at the beginning
of the year
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the end
of the year
Exercisable at the end of the year

197,319
131,720
(136,452)
–

192,587
–

211,460
289,264
(52,926)
(138,446)

309,352
–

1,938,097
763,823
–
(1,580,696)

1,121,224
–

226,295
32,777
(64,605)
(67,971)

126,496
–

101,664
198,259
(74,166)
(17,188)

208,569
–

The Group operates equity plans as outlined below:

STIP Restricted Equity
One-third of earned STIP is delivered in the form of deferred equity (Restricted Shares). The key terms of this award are:

• Subject to a mandatory restriction period and continued employment. Half of the award is restricted for one year

and the remaining half for two years from grant date;

• Holders of Restricted Shares are entitled to dividends and to exercise their voting rights during the restriction;

• Will generally be forfeited if the executive is dismissed for cause or resigns. Clawback mechanisms apply.

LTIP
Under the LTIP certain employees receive Performance Rights which entitle participants to receive the Company’s
shares at no cost subject to the achievement of performance conditions and continued employment. No dividends are
payable to participants prior to vesting. The performance conditions are:

• Relative Total Shareholder Return (TSR)

• Return on Capital Employed (ROCE) growth

• Will generally be forfeited if the executive is dismissed for cause or resigns. Clawback mechanisms apply.

For the F18 award, Performance Rights are subject to dual performance measures with equal weighting of TSR and
ROCE over a performance period of three years. The F19 and F20 awards were issued over the same performance
period but with a weighting of 25% for TSR and 75% for ROCE. The TSR and ROCE measures for the F18 plan were
not met in F20 resulting in Nil vesting.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 95

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 22 – EMPLOYEE EQUITY PLANS (CONTINUED)

Mid-term Incentive Plan (MTIP)
The Group awarded an MTIP grant in F19 and F20. Under the MTIP certain employees receive Performance Rights
which entitle the participant to receive shares at no cost subject to the achievement of performance conditions and
continuing employment. The F19 and F20 plans have two equal vesting conditions: time-based (50%) and ROCE
growth (50%). For the time-based conditions half vest in 1-year (25%) and half in 2-years (25%). The ROCE measure
for the F19 MTIP Plan was not met in F20 resulting in Nil vesting.

Restricted Equity Plan (REP)
Under the REP certain employees receive a grant of restricted equity awards in the form of Restricted Shares.
If Restricted Shares cannot be awarded (e.g. due to country specific regulation) Deferred Share Rights are granted.
The award is at no cost to the employee and is subject to a restriction period. Restricted equity awards require continued
employment with the Group through the restriction period. Other terms are similar to the STIP terms above.

Restricted equity awards may be granted to compensate employees for foregoing equity compensation in their previous
organisation as a sign-on award and/or as a retention incentive.

Share Cellar (broad-based Employee Share Plan)
Share Cellar is the Group’s broad-based Employee Share Plan and plan participation is offered annually. The plan
was first launched early in 2015. Participation is voluntary and employees in select countries are eligible to join the
Plan. Share Cellar operates as a matching plan whereby employees contribute funds to the Plan from their after-tax
pay and shares are acquired by the Group on their behalf. In the plans operating from 2015 to 2018, for every two
purchased shares that a participant holds at the vesting date (approximately two years) the Group delivers one
matched share, subject to continued employment. For employees enrolling in the 2019 and 2020 plan, the Group will
deliver one matched share for every purchased share held at the plan vesting date, subject to continued employment.

Participants are entitled to dividends and to exercise voting rights attached to the shares purchased under the plan,
and matched shares once they have been allocated.

Accounting policies
Employee equity plans are accounted for as share based payments, whereby employees render services in exchange
for the awards. The fair value of the shares and performance rights that are expected to vest is progressively
recognised as an employee benefits expense over the relevant vesting period with a corresponding increase in equity.

The fair value of shares granted is determined by reference to observed market values. The fair value of the TSR
component of performance rights is independently determined at grant date by an external valuer using a Monte-
Carlo simulation. For the non-market components (ROCE), the fair value is independently determined based on the
share price less the present value of dividends.

Non-market performance conditions do not impact the value of shares and performance rights, but rather the estimate
of the number of shares to vest.

At each reporting date the Company revises the estimate of the number of shares and the non-market component
of performance rights that are expected to vest, and the employee benefits expense recognised each period
incorporates this change in estimate.

An expense is recognised for the TSR component of performance rights whether or not the TSR hurdle is met.
No expense is recognised if these rights do not vest due to cessation of employment. No expense is recognised
for shares and non-market components of performance rights that do not ultimately vest.

96 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 22 – EMPLOYEE EQUITY PLANS (CONTINUED)

Active share-based payment plans:

Long-term Incentive Plans
The below table outlines the F20 and F19 LTIP plans which have a vesting date post 30 June 2020:

GRANT DATE

Grant date share price
Expected share price volatility (%)
Expected dividend yield (%)
Risk-free interest rate (%)
Fair value estimate at grant date – TSR
Fair value estimate at grant date – ROCE

F20 PLAN
11-NOV-19

F19 PLAN
12-NOV-18

$18.14
29.0
2.4
0.87
$11.77
$17.03

$15.56
28.0
1.9
2.1
$7.24
$14.80

Mid-term Incentive Plans
The below table outlines the F20 and F19 MTIP plans which have a vesting date post 30 June 2020:

GRANT DATE

Grant date share price
Expected dividend yield (%)
Fair value estimate at grant date – ROCE
Fair value estimate time-based – Vesting F20: 2020 (F19: 2019)
Fair value estimate time-based – Vesting F20: 2021 (F19: 2020)

Restricted Equity Plans

GRANT DATE

F17
5-Dec-16

F18
13-Nov-17
1-Mar-18

F19
12-Nov-18

F20
11-Nov-19

F20 PLAN
11-NOV-19

F19 PLAN
12-NOV-18

$18.14
2.4
$17.44
$17.79
$17.37

$15.56
1.9
$15.09
$15.32
$15.04

GRANT DATE
SHARE PRICE

$10.42

$15.82
$17.32

$15.56

$18.14

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 97

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
TAXATION
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 23 – INCOME TAX

The major components of income tax expense are:

Statement of profit or loss
Current income tax expense
Deferred income tax expense
Total tax expense

Deferred income tax expense included in the income tax expense comprises:
Decrease in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Deferred income tax

Tax reconciliation
The amount of income tax expense as shown in the consolidated statement of profit or loss
and other comprehensive income differs from the prima facie income tax expense attributable
to earnings. The differences are reconciled as follows:
Profit before tax excluding material items
Material items before tax
Profit before tax

Prima facie income tax expense attributable to profit from operations calculated
at the rate of 30% (F19: 30%)
Tax effect of:

Non-taxable income and profits, net of non-deductible expenditure
Other deductible items
Tax losses recognised
Change in tax rate
Foreign tax rate differential
Other
Under/(over) provisions in previous years

Total tax expense

Income tax expense on operations
Income tax benefit attributable to material items
Income tax expense

Deferred income tax relates to the following:
Deferred tax assets
The balance comprises temporary differences attributable to:

Inventory
Property, plant and equipment (including vines)
Right-of-use assets and lease liabilities
Accruals
Provisions
Deferred interest
Foreign exchange
Tax losses
Other

Total deferred tax assets

2020
$M

20191
$M

99.3
9.6
108.9

11.2
(1.6)
9.6

156.8
10.3
167.1

9.3
1.0
10.3

406.3
(36.6)
369.7

575.6
–
575.6

110.9

172.7

2.9
(5.8)
–
(0.7)
(5.3)
5.7
1.2
108.9

119.3
(10.4)
108.9

15.1
3.6
42.3
17.6
18.3
4.5
8.8
61.6
11.7
183.5

2.5
(3.4)
(2.3)
0.6
(6.1)
2.7
0.4
167.1

167.1
–
167.1

35.0
0.6
38.7
5.8
19.6
2.5
5.2
71.0
8.6
187.0

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

98 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 23 – INCOME TAX (CONTINUED)

Deferred tax liabilities
The balance comprises temporary differences attributable to:

Inventory
Property, plant and equipment (including vines)
Intangibles
Other

Total deferred tax liabilities

Movements in deferred income tax relate to the following:
Movement in deferred tax assets:
Opening balance

(Charged) to profit or loss
Recognised directly in Equity
Foreign currency translation
Reclassification
Other

Closing balance

Movement in deferred tax liabilities:
Opening balance

(Credited)/charged to profit or loss
Recognised directly in Equity
Business acquisitions
Transfer (to)/from Assets Held for Sale
Foreign currency translation
Reclassification

Closing balance

2020
$M

20191
$M

14.4
74.9
241.3
3.6
334.2

187.0
(11.2)
4.7
2.6
0.4
–
183.5

334.7
(1.6)
0.8
1.2
(4.4)
3.1
0.4
334.2

16.2
78.6
238.8
1.1
334.7

183.1
(9.3)
3.0
7.6
0.6
2.0
187.0

330.6
1.0
(1.4)
–
(5.3)
9.2
0.6
334.7

Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised
in net profit or loss but directly credited to equity

3.9

4.4

Unrecognised tax assets
There are potential future income tax benefits relating to accumulated losses in non-Australian group companies,
which have not been brought to account. These possible benefits amount to $38.1 million (F19: $38.5 million).

The Group has carry forward capital tax losses in Australia and the UK respectively. These losses may be used
to offset any future capital gains derived by activities in these countries. The Group will assess the conditions
for deductibility imposed by the tax laws of Australia and the UK prior to any utilisation of the capital losses.

Ongoing tax audits
The Group is subject to ongoing tax audits by taxation authorities in several jurisdictions covering a variety
of taxes. The Group fully cooperates with these enquiries as and when they arise.

Franking credits
The Australian Tax Consolidation Group has $86.7 million (F19: $58.7 million) of franking credits available
for subsequent reporting periods.

Key estimate and judgement:

Taxation
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining the worldwide provision for income taxes. There are many transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the current and deferred tax provisions in the period in which such determination is made.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 99

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
TAXATION
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 23 – INCOME TAX (CONTINUED)

Accounting policies

Current taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from, or paid to, taxation
authorities at the tax rates and tax laws enacted or substantively enacted by the reporting date.

Deferred taxes
Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred income tax assets
are recognised for all deductible temporary differences, carried forward unused tax assets and unused tax losses,
to the extent it is probable that they will be utilised.

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that
it will become probable that future taxable profit will allow the deferred tax asset to be recovered.

The carrying amount of deferred income tax assets is reviewed at balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be available to utilise them.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively
enacted at the balance sheet date.

Deferred income tax is provided on temporary differences at balance sheet date between accounting carrying amounts
and the tax bases of assets and liabilities, other than for:

• The initial recognition of an asset or liability in a transaction that is not a business combination and at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss or on the recognition of goodwill.

• Foreign taxes which may arise in the event of retained profits of foreign controlled entities being remitted

to Australia as there is no present intention to make any such remittances.

Deferred tax assets and deferred tax liabilities associated with indefinite life intangibles such as brand names
are measured based on the tax consequences that would follow from the use and sale of that asset.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Offsetting deferred tax balances
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity
and the same taxation authority.

100 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 24 – FINANCIAL RISK MANAGEMENT

Financial risk management framework
The Group’s financial risk management policies (‘Group Treasury Policies’) cover risk tolerance, internal controls
(including segregation of duties), delegated authority levels, management of foreign currency, interest rate and
counterparty credit exposures, and the reporting of exposures. These policies are reviewed at least annually and
approved by the Board of Directors.

The centralised Group Treasury function has been delegated operational responsibility for the identification and
management of financial risks.

The Group holds financial instruments from financing (principally borrowings), transactions (trade receivables and
payables) and risk management (derivatives) which result in exposure to the following financial risks, covered by the
Group Treasury Policies:

• Liquidity risk;

• Interest rate risk;

• Foreign exchange risk; and

• Counterparty credit risk.

The following table outlines how these risks impact Group financial assets and liabilities:

Net borrowings
Receivables
Other financial assets
Payables
Derivative financial assets and liabilities

(a) Liquidity risk

LIQUIDITY
RISK
(A)

INTEREST
RATE RISK
(B)

FOREIGN
EXCHANGE
RISK
(C)

CREDIT
RISK
(D)

✕
✕

✕
✕
✕
✕
✕

✕
✕
✕

NOTE

18
9
9
9
25, 32

Nature of the risk
The Group is exposed to liquidity risk primarily from its core operating activities. The Group’s focus is to ensure it is able
to meet financial obligations as and when they fall due.

Risk management
The Group ensures the maintenance, at all times, of an appropriate minimum level of liquidity, comprising committed,
unutilised debt facilities and cash resources. To facilitate this, the Group monitors forecast and actual cash flows,
performs sensitivity analysis as well as monitoring the availability and cost of debt and equity funding.

The Group’s objective is to balance continuity of funding and flexibility by maintaining an appropriately structured
debt maturity profile with a mix of bank and capital (bond) market debt, whilst also monitoring compliance with the
Group’s key financial covenants and undertakings.

At reporting date, the standby arrangements and unused credit facilities are as follows:

Committed facilities
Available facilities
Amounts utilised
Amount unutilised

2020
$M

2019
$M

2,111.3
(1,191.1)
920.2

1,887.1
(1,066.0)
821.1

The Group is in compliance with all undertakings under its various financing arrangements.

COVID-19 considerations
In F20 a number of additional measures were implemented to monitor the potential impact of COVID-19 to cash flows
and liquidity. These included:

• Bi-monthly reporting to a sub-committee of the Board of cash flow and trading outlooks, including sensitivity

analysis to consider the potential impacts of significant downside scenarios.

• Reductions in discretionary spending, including reduced travel and consulting spend, and reductions to non-essential

capital expenditure.

• The Group established a US$200.0 million syndicated debt facility maturing in October 2021. This facility was

undrawn at 30 June 2020.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Liquidity risk (continued)

Level of exposure at balance date
The following tables analyse the maturities of the Group’s contractual undiscounted cash flows arising from its material
financial liabilities, net and gross settled derivative financial instruments.

6 MONTHS
OR LESS
$M

6 MONTHS
TO 1 YEAR
$M

1 TO 2
YEARS
$M

2 TO 5
YEARS
$M

OVER
5 YEARS
$M

CONTRACTUAL
TOTAL
$M

CARRYING
AMOUNT
$M

MATURING IN:

2020
Non-derivative
financial liabilities
Bank loans2
Lease liabilities
Other loans
US Private Placement Notes
Trade Payables
Other Payables

Derivative financial
liabilities
Foreign exchange contracts
Interest rate and cross
currency swaps
Total financial liabilities

20191
Non-derivative
financial liabilities
Bank loans2
Lease liabilities
Other loans
US Private Placement Notes
Trade payables
Other Payables

Derivative
financial liabilities
Foreign exchange contracts
Interest rate and cross
currency swaps
Total financial liabilities

105.5
47.0
0.2
119.9
300.4
381.7

0.3

7.1
962.1

10.1
47.2
13.6
10.9
351.7
373.0

0.6

0.8
807.9

4.3
45.5
–
9.7
–
–

0.8

7.3
67.6

8.9
47.3
–
10.2
–
–

0.7

2.1
69.2

8.4
88.8
0.6
19.5
–
–

197.6
249.6
–
228.3
–
–

353.7
512.7
–
314.6
–
–

669.5
943.6
0.8
692.0
300.4
381.7

602.6
698.6
0.8
581.9
300.4
381.7

0.8

0.2

–

2.1

14.9
133.0

8.9
684.6

–
1,181.0

38.2
3,028.3

24.0
2,592.1

15.8
89.9
0.6
126.8
–
–

215.3
251.5
–
231.8
–
–

345.2
593.0
–
319.9
–
–

595.3
1,028.9
14.2
699.6
351.7
373.0

492.7
704.6
14.2
571.0
351.7
373.0

0.7

0.2

–

2.2

4.8
238.6

7.4
706.2

–
1,258.1

15.1
3,080.0

6.8
2,516.2

2. Loans are stated net of capitalised facility finance costs. At reporting date, the balance of bank loans is $609.2 million

(F19: $499.6 million) against capitalised facility finance costs of $6.6 million (F19: $6.9 million) to be amortised over the facility period.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

102 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(b) Interest rate risk

Nature of the risk
The Group is exposed to interest rate risk principally from floating rate borrowings, including bank borrowings and US
Private Placement Notes. Other sources of interest rate risk include receivable purchasing agreements, interest-bearing
investments, creditors’ accounts offering a discount and debtors’ accounts on which discounts are offered.

Risk management
We manage interest rate risk by ensuring that the sensitivity of forecast future earnings to changes in interest rates
is within acceptable limits. This involves longer term forecasting of both expected earnings and expected borrowing
to determine the tolerable exposure.

A combination of interest rate swaps were exchanged to obtain the desired ratio of fixed and floating interest rates.
At 30 June 2020, interest rate swap contracts were in use to exchange fixed interest rates to floating rates on
$363.7 million (US$250.0 million) of US Private Placement notes. The swaps mature in December 2023, June 2027
and June 2029. Cross currency interest rate swaps are used to exchange floating USD interest on a portion of the USD
syndicated debt facility of US$120 million into AUD fixed rate of $166.6 million with maturities in November 2023.

During the year interest rate collars were established to allow participation of floating interest rates whilst setting
a fixed cap rate or fixed floor rate on $116.4 million (US$80.0 million) of drawn syndicated debt facilities and
$101.8 million (US$70.0 million) of US Private Placement notes. The interest rate collars have maturities in June
2021, August 2021 and September 2022. Please refer note 23(a) for the profile and timing of cash flows over the next
five years.

Level of exposure at balance date
The Group’s exposure to variable interest rate risk results from the following financial instruments at balance sheet date:

Financial assets
Cash and cash equivalents
Total assets
Financial liabilities
US Private Placement Notes1
Bank loans1
Total liabilities

1. Net of hedged amounts.

2020
$M

449.1
449.1

43.6
318.2
361.8

2019
$M

401.8
401.8

285.5
328.3
613.8

Sensitivity analysis
The table below shows the impact by currency denomination if the Group’s weighted average floating interest rates
change from the year-end rates of 1.23% (F19: 2.14%) with all other variables held constant.

CURRENCY

USD
AUD
GBP

SENSITIVITY

2020

2019

+ / - 25bp
+ / - 25bp
+ / - 25bp

PRE-TAX IMPACT ON PROFIT

+
$M

(0.2)
0.2
0.1

2020

–
$M

0.2
(0.2)
(0.1)

+
$M

(1.4)
0.7
–

2019

–
$M

1.4
(0.7)
–

The movements in profit on a consolidated level are primarily a result of interest costs from borrowings. There would
have been no significant impact on equity.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 103

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)

Nature of the risk
The Group is exposed to foreign exchange risk through:

• Transaction exposures including sales of wine into export markets and the purchase of production inputs,

denominated in foreign currencies other than the respective functional currency of the specific Group entity;

• Exposures arising from borrowings denominated in foreign currencies; and

• Translation exposures including earnings of foreign subsidiaries and revaluation of monetary assets and liabilities,

including borrowings.

The currencies in which these transactions are primarily denominated are the Australian Dollar (AUD), United
States Dollar (USD) and Great British Pound (GBP). Other currencies used include the Canadian Dollar, Euro,
New Zealand Dollar, Singapore Dollar, Swedish Krona, Norwegian Krone, Chinese Renminbi and South African Rand.

Risk management
The focus of the Group’s foreign exchange risk management activities is on the transactional exposures arising from
the sourcing and sale of wine.

A proportion of expenses are hedged over time up to a period of three years. The nominal amount and average hedge
rate of the instruments in place at 30 June 2020 are disclosed in the following table.

In determining the amount of hedging required, the Group also considers the ‘natural hedges’ arising from the
underlying net cash flows in the relevant currency, comprising operating, investing and financing cash flows.

Details of the Group’s open hedges at balance sheet date are shown below.

Open foreign currency hedges at 30 June 2020

CURRENCY

HEDGE TYPE

AUD/USD

AUD/GBP

Forwards
Options
Total
Forwards
Options
Total

HEDGE VALUE
(NOTIONAL AUD)
$M

AVERAGE
HEDGE
RATE

65.2
199.2
264.4
32.3
209.9
242.2

0.6353
0.6644

0.5320
0.5255

104 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)

Level of exposure at balance date
At the reporting date, the Group’s financial assets and liabilities were denominated across the following currencies:

ALL BALANCES TRANSLATED TO AUD

2020
Net debt
Cash and cash equivalents
Loan receivable
Bank loans2
US Private Placement Notes (net of fair value hedge)
Lease liabilities
Other loan payable
Net debt

Other financial assets/(liabilities)
Trade receivables (net of allowance for expected credit loss)
Other receivables
Trade and other payables
Net other assets/(liabilities)

20191
Net debt
Cash and cash equivalents
Loan receivable
Bank loans2
US Private Placement Notes (net of fair value hedge)
Lease liabilities
Other loan payable
Net debt

Other financial assets/(liabilities)
Trade receivables (net of allowance for expected credit loss)
Other receivables
Trade and other payables
Net other assets/(liabilities)

AUD
$M

USD
$M

GBP
$M

OTHER
$M

TOTAL
$M

160.4
0.6
(98.2)
–
(105.6)
(0.8)
(43.6)

226.0
25.1
(323.3)
(72.2)

273.8
0.7
1.8
–
(106.1)
(14.2)
156.0

305.8
36.2
(306.7)
35.3

186.1
–
(504.4)
(581.9)
(568.2)
–
(1,468.4)

110.8
18.8
(240.0)
(110.4)

75.6
-
(494.5)
(571.0)
(582.8)
-
(1,572.7)

116.1
52.5
(287.7)
(119.1)

58.4
–
–
–
(0.4)
–
58.0

74.2
0.5
(61.2)
13.5

10.9
–
–
–
(0.9)
–
10.0

73.2
0.6
(70.3)
3.5

44.2
–
–
–
(24.4)
–
19.8

57.6
0.8
(57.6)
0.8

41.5
–
–
–
(14.8)
–
26.7

48.1
2.1
(53.9)
(3.7)

449.1
0.6
(602.6)
(581.9)
(698.6)
(0.8)
(1,434.2)

468.6
45.2
(682.1)
(168.3)

401.8
0.7
(492.7)
(571.0)
(704.6)
(14.2)
(1,380.0)

543.2
91.4
(718.6)
(84.0)

2. Includes capitalised borrowing costs of $6.6 million (F19: $6.9 million).

Sensitivity analysis
The following table illustrates the impact of potential foreign exchange movements on profit before tax and the
statement of financial position at 30 June:

CURRENCY

United States Dollar
Great Britain Pound
Euro
Canadian Dollar
New Zealand Dollar

SENSITIVITY
ASSUMPTION1

2020

2019

10.9%
9.8%
9.4%
8.6%
5.8%

8.2%
9.9%
7.1%
6.2%
5.4%

PRE-TAX IMPACT ON PROFIT
$M

IMPACT ON EQUITY
$M

2020

–

1.1
0.5
(1.1)
1.6
0.1

(0.9)
(0.4)
0.9
(1.4)
(0.1)

2019

–

1.0
0.1
0.4
1.3
0.2

2020

–

103.1
29.1
8.9
(1.5)
9.1

(78.0)
(22.0)
(7.3)
1.3
(8.1)

(45.8)
(14.3)
0.3
1.0
(6.9)

2019

–

58.4
19.9
0.4
(1.1)
7.7

(0.8)
(0.1)
(0.3)
(1.2)
(0.1)

3. Australian dollar versus individual currencies. Implied one-year currency volatility at reporting date (Source: Bloomberg).

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(d) Credit risk

Nature of the risk
Counterparty credit risk arises primarily from the following assets:

• Cash and cash equivalents;

• Trade and other receivables; and

• Derivative instruments.

Risk management
The Group’s counterparty credit risk management philosophy is to limit the Group’s loss from default by any one
counterparty by dealing only with financial institution counterparties of good credit standing, setting maximum
exposure limits for each counterparty, and taking a conservative approach to the calculation of counterparty credit
limit usage. Where available, credit opinions on counterparties from two credit rating agencies are used to determine
credit limits.

The Group assesses the credit quality of individual customers prior to offering credit terms and continues to monitor
on a regular basis. Each customer is assigned a risk profile based upon the measurable risk indicators for dishonoured
payments, adverse information and average days late along with the securities and guarantees held. All prospective
accounts are required to complete a credit application and generally a director’s guarantee is required with minimal
exceptions. Failure to provide a director’s guarantee results in either no credit or a limited level of credit offered.
Credit terms may be reduced or extended for individual customers based on risk.

Past due accounts are subject to a number of collection activities which range from telephone contact, suspension
of orders through to legal action. Past due accounts are reviewed monthly with specific focus on accounts that are
greater than 90 days overdue. Where debt cannot be recovered, it is escalated from the credit representative to the
credit manager to initiate recovery action.

For derivatives, the Group transacts under an International Swaps and Derivatives Association (ISDA) master netting
agreement. If a credit event such as a default occurs, all outstanding transactions under an ISDA agreement are
terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.

COVID-19 considerations
In F20 the Group, as part of its normal monitoring of the credit quality of trade receivables, implemented more
frequent telephone contact and engagement with customers to understand customer trading and credit circumstances,
and supporting them through any short term challenges identified. The Group also increased the frequency of
monitoring customer credit risk assessments across the entire customer portfolio. No customers were identified to be
in financial distress and no bad debts have been written off in F20.

Level of exposure at balance date
The maximum counterparty credit risk exposure at 30 June 2020 in respect of derivative financial instruments was
$13.9 million (F19: $3.4 million) and in respect of cash and cash equivalents was $109.6 million (F19: $110.0 million).
The Group’s authorised counterparties are restricted to banks and financial institutions whose long-term credit rating
is at or above a Standard and Poors rating of A- (or Moody’s equivalent rating of A3), with any exceptions requiring
approval from the Board. Commercial paper investments are restricted to counterparties whose short-term credit
rating is at or above a Standard and Poor’s rating of A-1 (or Moody’s equivalent rating of P-2). The magnitude
of credit risk in relation to receivables is generally the carrying amount, net of any allowance for expected credit
loss. The ageing of the consolidated Group trade receivables (net of provisions) is outlined below:

Not past due
Past due 1–30 days
Past due 31–60 days
Past due 61 days+
Total

2020
$M

396.4
20.9
18.2
33.1
468.6

2019
$M

489.1
29.7
9.4
15.0
543.2

Trade receivables have been aged according to their due date. Terms may be extended on a temporary basis with the
approval of management. The past due receivables shown above relate to customers who have a good debt history and
are considered recoverable. There is no collateral held as security against the receivables above and there are no other
receivables past due.

106 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 25 – DERIVATIVE FINANCIAL INSTRUMENTS

At reporting date, there were $506.5 million (Australian dollar equivalent) net face value of outstanding foreign
exchange contracts at contract rates (F19: $721.9 million), interest rate swaps of $654.7 million (F19: $499.6 million)
and cross currency interest rate swaps of $174.6 million (F19: $171.3 million) and interest rate collars of $218.2 million
(F19: Nil). These instruments are regarded as Level 2 under AASB’s Fair Value measurement hierarchy.

NOTE 26 – FAIR VALUES

The fair values of cash and cash equivalents, financial assets and most financial liabilities approximate their carrying
value. The fair value of the US Private Placement Notes is $679.3 million (F19: $637.1 million) and the fair value of
the syndicated debt facility is $530.3 million (F19: $544.5 million). There have been no reclassifications of financial
assets from fair value to cost, or from cost or amortised cost to fair value during the year.

The fair values of derivative financial instruments are based upon market prices, or models using inputs observed
from the market, where markets exist or have been determined by discounting the expected future cash flows by
the current interest rate for financial assets and financial liabilities with similar risk profiles (a Level 2 valuation).

The valuation of derivative financial assets and liabilities reflects the estimated amounts which the Group would
be required to pay or receive to terminate the contracts (net of transaction costs) or replace the contracts at their
current market rates at reporting date. This is based on internal valuations using standard valuation techniques.

As the purpose of these derivative financial instruments is to hedge the Group’s underlying assets and liabilities
denominated in foreign currencies and to hedge against risk of interest rate fluctuations, it is unlikely in the absence
of abnormal circumstances that these contracts would be terminated prior to maturity.

For all other recognised financial assets and financial liabilities, based on the facts and circumstances existing
at reporting date and the nature of the Group’s financial assets and financial liabilities including hedge positions,
the Group has no reason to believe that the financial assets could not be exchanged, or the financial liabilities could
not be settled, in an arm’s length transaction at an amount approximating its carrying amount.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP COMPOSITION
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 27 – SUBSIDIARIES

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries:

ENTITY NAME

Equity holding of 100% (F19: 100%)
Aldershot Nominees Pty. Ltd.*
B Seppelt & Sons Limited*
Beringer Blass Distribution S.R.L.
Beringer Blass Italia S.R.L.
Beringer Blass Wine Estates Chile Limitada
Beringer Blass Wine Estates Limited
Beringer Blass Wines Pty. Ltd.*
Bilyara Vineyards Pty. Ltd.*
Cellarmaster Wines (UK) Limited
Cellarmaster Wines Holdings (UK) Limited
Coldstream Australasia Limited*
Cuppa Cup Vineyards Pty. Ltd.
Devil’s Lair Pty. Ltd.
Ewines Pty. Ltd.
FBL Holdings Limited
Il Cavaliere del Castello di Gabbiano S.r.l.
Interbev Pty. Ltd.*
James Herrick Wines Limited(a)
Leo Buring Pty. Ltd.
Lindeman (Holdings) Limited*
Lindemans Wines Pty. Ltd.
Mag Wines Pty. Ltd
Majorca Pty. Ltd.*
Mildara Holdings Pty. Ltd.*
North America Packaging (Pacific Rim) Corporation
Penfolds Wines Pty Ltd
Piat Pere et Fils B.V.
Premium Land, Inc.
Robertsons Well Pty. Ltd.
Robertsons Well Unit Trust
Rosemount Estates Pty. Ltd.
Rothbury Wines Pty. Ltd.*
SCW905 Limited*
Seaview Wynn Pty. Ltd.*
Société Civile d’Exploitation Agricole Cambon La Pelouse1
Southcorp Australia Pty. Ltd. *
Southcorp Brands Pty. Ltd.*
Southcorp International Investments Pty. Ltd.*
Southcorp Limited*
Southcorp NZ Pty. Ltd.*
Southcorp Whitegoods Pty. Ltd.
Southcorp Wines Asia Pty. Ltd.
Southcorp Wines Europe Limited(a)
Southcorp Wines Pty. Ltd.*
Southcorp XUK Limited
T’Gallant Winemakers Pty. Ltd.
The New Zealand Wine Club Limited(a)
The Rothbury Estate Pty. Ltd.*
Tolley Scott & Tolley Limited*
Treasury Americas Inc

1. F19 equity holding of 0%

108 | TREASURY WINE ESTATES ANNUAL REPORT 2020

COUNTRY OF
INCORPORATION

Australia
Australia
Italy
Italy
Chile
UK
Australia
Australia
UK
UK
Australia
Australia
Australia
Australia
UK
Italy
Australia
UK
Australia
Australia
Australia
Australia
Australia
Australia
USA
Australia
Netherlands
USA
Australia
Australia
Australia
Australia
Australia
Australia
France
Australia
Australia
Australia
Australia
Australia
Australia
Australia
UK
Australia
UK
Australia
UK
Australia
Australia
USA

NOTE 27 – SUBSIDIARIES (CONTINUED)

ENTITY NAME

Treasury Chateau & Estates LLC
Treasury Logistics Pty Ltd*
Treasury Wine Estates (China) Holding Co Pty Ltd*
Treasury Wine Estates (Matua) Limited
Treasury Wine Estates (NZ) Holding Co Pty Ltd*
Treasury Wine Estates (Shanghai) Trading Co. Ltd.
Treasury Wine Estates (UK) Holding Co Pty Ltd*
Treasury Wine Estates Americas Company
Treasury Wine Estates Asia (SEA) Pte Ltd
Treasury Wine Estates Asia Pty. Ltd.
Treasury Wine Estates Australia Limited*
Treasury Wine Estates Barossa Vineyards Pty. Ltd.
Treasury Wine Estates Canada, Inc.
Treasury Wine Estates Denmark ApS
Treasury Wine Estates EMEA Limited
Treasury Wine Estates France S.A.R.L.
Treasury Wine Estates HK Limited
Treasury Wine Estates Holdings Inc.
Treasury Wine Estates Japan KK
Treasury Wine Estates Limited*
Treasury Wine Estates Netherlands B.V
Treasury Wine Estates Norway AS
Treasury Wine Estates Sweden AB
Treasury Wine Estates UK Brands Limited
Treasury Wine Estates Vintners Limited*
TWE Finance (Aust) Limited*
TWE Finance (UK) Limited
TWE Insurance Company Pte. Ltd.
TWE Lima Pty Ltd*
TWE Share Plans Pty Ltd
TWE US Finance Co.
TWE USA Partnership
Wolf Blass Wines Pty. Ltd.*
Woodley Wines Pty. Ltd.
Wynn Winegrowers Pty. Ltd.
Wynns Coonawarra Estate Pty. Ltd

COUNTRY OF
INCORPORATION

USA
Australia
Australia
New Zealand
Australia
China
Australia
USA
Singapore
Australia
Australia
Australia
Canada
Denmark
UK
France
Hong Kong SAR, China
USA
Japan
Australia
Netherlands
Norway
Sweden
UK
Australia
Australia
UK
Singapore
Australia
Australia
USA
USA
Australia
Australia
Australia
Australia

* Entity is a member of the Closed Group under the Deed of Cross Guarantee (refer to note 29) and relieved from the requirement

to prepare audited financial statements by ASIC Corporations (Wholly owned Companies) Instrument 2016/785.

(a) These entities were dissolved on 3 March 2020.

Equity holding of less than 100%

ENTITY NAME

Fiddlesticks LLC
Graymoor Estate Joint Venture
Graymoor Estate Pty. Ltd.
Graymoor Estate Unit Trust
North Para Environment Control Pty. Ltd.

COUNTRY OF
INCORPORATION

% OF HOLDING

USA
Australia
Australia
Australia
Australia

2020

50.0
48.8
48.8
48.8
69.9

2019

50.0
48.8
48.8
48.8
69.9

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP COMPOSITION
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 28 – PARENT ENTITY FINANCIAL INFORMATION

(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:

Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Net assets

Shareholders’ equity
Issued capital
Share based payments reserve
Retained earnings
Total equity

Profit for the year
Total comprehensive income

2020
$M

2019
$M

841.4
8,948.2
5,293.7
5,293.7
3,654.5

3,269.8
(54.6)
439.3
3,654.5

350.0
350.0

827.0
8,933.1
5,343.3
5,343.3
3,589.8

3,247.3
(34.6)
377.1
3,589.8

421.0
421.0

Current liabilities comprise balances with other entities within the Group. These balances will not be called within
the next 12 months.

(b) Financial guarantees
Refer note 18 for financial guarantees to banks, financiers and other persons.

(c) Tax consolidation legislation
The Company formed a consolidated group for income tax purposes with each of its Australian resident subsidiaries
on 21 May 2011. The Company and the controlled entities in the tax consolidation group continue to account for
current and deferred tax amounts separately. These tax amounts are measured on a ‘group allocation’ approach,
under which the current and deferred tax amounts for the tax-consolidated group are allocated among each reporting
entity in the Group.

(d) Capital commitments
There are no capital commitments for the Company (F19: nil).

NOTE 29 – DEED OF CROSS GUARANTEE

Under the terms of ASIC Corporations (Wholly owned Companies) Instrument 2016/785, certain wholly owned
controlled entities have been granted relief from the requirement to prepare audited financial reports. It is a condition
of the class order that the Company and each of the relevant subsidiaries enter into a Deed of Cross Guarantee whereby
each company guarantees the debts of the companies party to the Deed. The member companies of the Deed of Cross
Guarantee are regarded as the ‘Closed Group’ and identified in note 27.

A summarised consolidated statement of profit or loss and other comprehensive income, retained earnings reconciliation
and a consolidated statement of financial position, comprising the Company and those controlled entities which are a
party to the Deed of Cross Guarantee, after eliminating all transactions between parties to the Deed, at 30 June 2020
are set out below.

Extract of the statement of profit or loss and other comprehensive income
Profit before tax
Income tax expense
Net profit after tax
Retained earnings at beginning of the year
External dividends
Retained earnings at end of the year

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

110 | TREASURY WINE ESTATES ANNUAL REPORT 2020

2020
$M

268.7
(79.6)
189.1
190.7
(287.9)
91.9

20191
$M

452.3
(137.4)
314.9
127.1
(251.3)
190.7

NOTE 29 – DEED OF CROSS GUARANTEE (CONTINUED)

Statement of financial position
Current assets
Cash and cash equivalents
Receivables
Inventories
Investments
Other current assets
Total current assets

Non-current assets
Inventories
Investments
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets

Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Other current liabilities
Total current liabilities

Non-current liabilities
Borrowings
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets

Equity
Contributed equity
Reserves
Retained earnings
Total equity

2020
$M

20191
$M

267.3
245.3
495.6
1.9
6.6
1,016.7

528.9
2,257.5
588.7
96.2
576.9
35.7
2.7
4,086.6
5,103.3

306.6
643.9
23.9
38.5
6.7
1,019.6

638.7
122.6
11.6
772.9
1,792.5
3,310.8

3,269.8
(50.9)
91.9
3,310.8

273.1
296.2
480.0
1.9
4.4
1,055.6

569.9
2,257.5
541.4
98.0
569.3
31.1
1.1
4,068.3
5,123.9

308.6
565.2
89.2
28.9
4.7
996.6

586.6
125.5
10.3
722.4
1,719.0
3,404.9

3,247.3
(33.1)
190.7
3,404.9

Current borrowings include balances with other entities within the Group. These balances will not be called within
the next 12 months.

1. Reported results restated for changes to accounting policies. Refer to note 32 for transition impacts.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 111

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 30 – RELATED PARTY DISCLOSURES

Ownership interests in related parties
All material ownership interests in related parties are disclosed in note 27 to the financial statements.

Parent entity
The ultimate parent entity is Treasury Wine Estates Limited, which is domiciled and incorporated in Australia.

Transactions with entities in the wholly-owned Group
Transactions between companies within the Group during the current and prior year included:

• Purchases and sales of goods and services; and

• Provision of accounting and administrative assistance.

Transactions with controlled entities are made on normal commercial terms and conditions.

Transactions with other related parties
The Group entered into transactions which are insignificant in amount with executives, non-executive Directors and
their related parties within normal employee, customer or supplier relationships on terms and conditions no more
favourable than those available in similar arm’s length dealings.

There were no other transactions with related parties during the current year.

Key management personnel compensation
The following table shows the compensation paid or payable to the key management personnel (‘executives’) of the Group.

Short-term employee benefits
Post-employment benefits
Share based payments
Total

2020
$

2019
$

3,796,905
63,008
6,897,611
10,757,524

9,734,012
54,272
5,306,803
15,095,087

Additionally, compensation paid to non-executive directors was $1,962,059 (F19: $1,845,107).

NOTE 31 – REMUNERATION OF AUDITORS

The Audit and Risk Committee has completed an evaluation of the overall effectiveness and independence of the
external auditor, KPMG. As part of this process, the external auditor has provided a written statement that no
professional engagement with the Group has been carried out which would impair their independence as auditor.
The Chairman of the Audit and Risk Committee has advised the Board that the Committee’s assessment is that
the auditor is independent.

During the year, the following fees were paid or payable for services provided by the auditor of the Group, and its
related practices:

Audit and review of financial statements and other
audit work under the Corporations Act 2001
Associate firms of Auditor
Other assurance services
Audit and review services
Other non-audit services
Total

2020
$

2019
$

1,303,462
420,737
–
1,724,199
58,882
1,783,081

1,452,298
397,702
51,000
1,901,000
346,348
2,247,348

The Group engages KPMG to provide other non-audit services where their expertise and experience best qualifies them
to provide the appropriate service and as long as stringent independence requirements are satisfied. In the year ended
30 June 2020, KPMG earned fees in respect to the provision of advisory and taxation services.

112 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 32 – OTHER ACCOUNTING POLICIES

New accounting standards and interpretations
Since 30 June 2019, the Group has adopted the following new and amended accounting standards.

REFERENCE

AASB 16
IFRS Interpretations
Committee –
April 2020
Interpretation 23

AASB 2017-4
AASB 9

AASB 128
AASB 119

TITLE

Leases

Multiple Tax Consequences of Recovering an Asset (AASB 112 Income
Taxes)—Agenda Paper 2
Uncertainty over Income Tax Treatments
Amendments to Australian Accounting Standards – Uncertainty over Income
Tax Treatments
Prepayment Features with Negative Compensation (Amendments to IFRS 9)
Long-term Interests in Associates and Joint Ventures (Amendments
to AASB 128)
Plan Amendment, Curtailment or Settlement (Amendments to AASB 119)
Annual Improvements to IFRS Standards 2015–2017 Cycle – various standards

AASB 2019-3

Interest Rate Benchmark Reform

APPLICATION

1 January 2019

1 January 2019
1 January 2019

1 January 2019
1 January 2019
1 January 2019

1 January 2019

Other than the impact of AASB 16 Leases and the IFRS Interpretation Committee – April 2020 outlined below,
the adoption of these standards did not have a significant impact on the consolidated financial statements.

AASB 16 Leases
AASB 16 Leases was released in February 2016 by the Australian Accounting Standards Board. This standard
removes the lease classification test for lessees and requires the Group to bring all material leases with lease terms
greater than one year onto the balance sheet. There is also new guidance on when an arrangement would meet the
definition of a lease. The Group has chosen not to recognise short-term leases, which are those less than 12 months,
and leases of low-value assets on the balance sheet.

The Group recognises new assets and liabilities for its operating leases including vineyards, buildings, equipment
and motor vehicles, and the nature of the expenses related to those leases changed as AASB 16 Leases replaced
the straight-line operating lease expense with a depreciation charge for the right-of-use assets and interest expense
on the lease liabilities.

The Group applied the full retrospective transition option and applied the adopted policy on a fully retrospective basis
from 1 July 2019. Please refer to note 11 for the Group’s policy on leases.

IFRIC Agenda Decision – Multiple Tax Consequences of Recovering an Asset (AASB 112 Income Taxes)
The IFRS Interpretations Committee received a request about deferred tax when the recovery of the carrying amount
of an asset gives rise to multiple tax consequences, specifically, where an entity acquires an intangible asset with a
finite useful life as part of a business combination. The request asked how the entity determines the tax base of the
asset and, consequently, how it recognises and measures deferred tax based on the principles of AASB 112 Income
Taxes (referred as AASB 112).

In applying this decision from the IFRS Interpretations Committee, the Group has recognised a deferred tax liability
on historic intangible asset acquisitions as part of a business combination.

Impact of adopting new policies
The below summarises the impact of adopting the new policies on the Group’s consolidated financial statements
for those periods presented within the 30 June 2020 financial statements. Only restated lines have been included
in the tables below:

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 113

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (EXTRACT)

Operating profit has been restated to remove operating lease payments previously recognised and to recognise
depreciation expense on the right-of-use assets that are now recognised on the balance sheet. Interest expense on
lease liabilities has been recognised within finance costs. Adjustments to taxation are due to the change in profit
before taxation. Currency translation gains/losses have also been restated to reflect the foreign exchange impact
of AASB 16 Leases on foreign subsidiaries.

30 JUNE 2019
$M
REPORTED

INCREASE/
DECREASE

AASB 16

AASB 112

Cost of sales
Finance costs
Profit before tax
Income tax expense
Net profit attributed to members of Treasury Wine
Estates Limited
Exchange difference on translation of foreign operations
Total comprehensive income for the year
attributable to members of Treasury Wine Estates
Limited
Earnings per share for profit attributed to the ordinary
equity holders of the Company

• Basic
• Diluted

(1,660.8)
(99.4)
591.0
(171.5)

419.5
69.2

18.3
(33.7)
(15.4)
4.3

(11.1)
(3.1)

478.1

(14.2)

58.4
58.1

(1.5)
(1.5)

–
–
–
0.1

0.1
–

0.1

–
–

30 JUNE 2019
$M
RESTATED

(1,642.5)
(133.1)
575.6
(167.1)

408.5
66.1

464.0

56.9
56.6

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EXTRACT)

The Group recognised right-of-use assets on the balance sheet representing the right to use of the underlying assets
from the lease contracts. Current and non-current lease liabilities were also recognised for the present value of the
lease payments due under the lease contracts. Deferred tax adjustments are due to temporary timing differences
arising from the recognition of right-of-use assets and lease liabilities. Shareholder’s equity has been restated
to reflect the cumulative impact of AASB 16 Leases on retained earnings and currency translation adjustment
as a result of restatement of foreign subsidiaries.

The Group recognised a deferred tax liability with a corresponding increase to goodwill in relation to the AASB 112
accounting policy change, for deferred taxes recognised on intangible asset acquisitions as part of a business combination.

30 JUNE 2019
$M
REPORTED

INCREASE/
DECREASE

AASB 16

AASB 112

30 JUNE 2019
$M
RESTATED

2,092.9
–
152.3
1,398.7
1,163.8

780.7
45.8
30.4
194.1
1,147.7

33.8
424.4

(45.6)
535.9
34.7
(28.8)
–

(62.1)
(2.2)
(17.3)
6.0
646.9

(4.6)
(70.5)

–
–
–
–
145.1

–
–
–
134.6
–

(0.1)
10.6

2,047.3
535.9
187.0
1,369.9
1,308.9

718.6
43.6
13.1
334.7
1,794.6

29.1
364.5

Assets
Current and non-current inventory
Right-of-use assets
Deferred tax assets
Property, plant and equipment
Intangible assets

Liabilities
Trade and other payables
Provisions
Other current and non-current liabilities
Deferred tax liabilities
Current and non-current borrowings

Equity
Reserves
Retained earnings

114 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EXTRACT) (CONTINUED)

Assets
Current and non-current inventory
Right-of-use assets
Deferred tax assets
Property, plant and equipment
Intangible assets

Liabilities
Trade and other payables
Provisions
Other current and non-current liabilities
Deferred tax liabilities
Current and non-current borrowings

Equity
Reserves
Retained earnings

30 JUNE 2018
$M
REPORTED

INCREASE/
DECREASE

AASB 16

AASB 112

30 JUNE 2018
$M
RESTATED

1,964.4
–
154.5
1,416.5
1,128.9

759.3
45.4
24.1
190.8
875.3

0.4
256.2

(39.3)
456.0
28.6
(30.2)
–

(62.2)
(1.4)
(4.3)
5.4
538.6

(1.6)
(59.4)

–
–
–
–
145.0

–
–
–
134.5
–

–
10.5

1,925.1
456.0
183.1
1,386.3
1,273.9

697.1
44.0
19.8
330.7
1,413.9

(1.2)
207.3

CONSOLIDATED STATEMENT OF CASH FLOWS (EXTRACT)

There is no impact on overall cash flows on the Group from the adoption of AASB 16 Leases. Cash outflows for lease
payments have been reclassified from operating activities – “payments to suppliers, governments and employees”
to operating activities – “interest paid” and cash flows used in financing activities – ‘repayment of borrowings’.
There is no impact to cash flows as a result of adopting the amendments to AASB 112 Income Taxes.

Payment to suppliers, governments and employees

Interest paid

Repayment of borrowings

30 JUNE 2019
$M
REPORTED

INCREASE/
DECREASE
$M

30 JUNE 2019
$M
RESTATED

(3,110.0)

(43.8)

(492.2)

80.0

(33.7)

(46.3)

(3,030.0)

(77.5)

(538.5)

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 115

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

SEGMENT INFORMATION (EXTRACT)

The principal profit metric for internal management reporting is Management earnings before interest, tax, SGARA
and material items (EBITS). The adoption of AASB 16 Leases also requires the recognition of depreciation expense
on the right-of use assets.

The table below outlines the impact of AASB 16 Leases adoption, the reclassification of Middle, East and Africa
(‘MEA’) from Asia to Europe (refer to note 2 for further information), and the AASB 112 Income Taxes policy change,
on reported EBITS, depreciation expense, Segment Asset and Segment Liabilities.

ANZ
$M

AMERICAS
$M

ASIA
$M

EMEA
$M

TOTAL
SEGMENT
$

UNALLOCATED/
CORPORATE
$M

CONSOLIDATED
$M

Management EBITS –
30 June 2019 reported
Increase/(Decrease)
from AASB 16
Increase/(Decrease)
from MEA
Management EBITS –
30 June 2019 restated

Depreciation – 30 June
2019 reported
(Increase)/Decrease
AASB 16
Depreciation –
30 June 2019 restated

Segment Assets –
30 June 2019 reported
Increase/(Decrease)
for AASB 16
Increase/(Decrease)
for AASB 112
Increase/(Decrease)
from MEA
Segment Assets –
30 June 2019 restated

Segment Liabilities –
30 June 2019 reported
(Increase)/Decrease
for AASB 16
(Increase)/Decrease
for AASB 112
Segment Liabilities –
30 June 2019 restated

156.5

218.7

293.5

51.4

720.1

(57.4)

1.5

14.7

1.0

0.4

17.6

–

(11.5)

11.5

–

0.7

–

158.0

233.4

283.0

63.3

737.7

(56.7)

(38.4)

(44.6)

(13.7)

(38.2)

(52.1)

(82.8)

(0.9)

(2.7)

(3.6)

(1.8)

(85.7)

(0.7)

(55.3)

(2.5)

(141.0)

(3.5)

(3.6)

(7.1)

662.7

18.3

–

681.0

(89.2)

(58.9)

(148.1)

2,286.2

2,487.6

228.3

357.5

5,359.6

640.6

6,000.2

74.6

353.7

144.3

–

5.6

–

1.7

0.8

435.6

145.1

(10.9)

10.9

–

60.6

–

496.2

145.1

–

2,505.1

2,841.3

223.0

370.9

5,940.3

701.2

6,641.5

(273.1)

(421.7)

(51.8)

(92.8)

(839.4)

(1,454.7)

(2,294.1)

(86.3)

(443.6)

(6.1)

(2.2)

(538.2)

(33.1)

–

(134.6)

(571.3)

(134.6)

(359.4)

(865.3)

(57.9)

(95.0)

(1,377.6)

(1,622.4)

(3,000.0)

116 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

SEGMENT INFORMATION (EXTRACT)

Segment Assets –
30 June 2018 reported
Increase/(Decrease)
for AASB 16
Increase/(Decrease)
for AASB 112
Increase/(Decrease)
from MEA
Segment Assets –
30 June 2018 restated

Segment Liabilities –
30 June 2018 reported
(Increase)/Decrease
for AASB 16
(Increase)/Decrease
for AASB 112
Segment Liabilities –
30 June 2018 restated

ANZ
$M

AMERICAS
$M

ASIA
$M

EMEA
$M

TOTAL
SEGMENT
$

UNALLOCATED/
CORPORATE
$M

CONSOLIDATED
$M

2,212.6

2,362.9

192.6

329.6

5,097.7

51.8

322.1

144.2

–

8.1

–

(7.1)

2.3

0.8

7.1

384.3

145.0

–

348.0

30.8

–

5,445.7

415.1

145.0

–

2,408.6

2,685.0

193.6

339.8

5,627.0

378.8

6,005.8

(269.3)

(401.1)

(57.9)

(87.5)

(815.8)

(1,133.6)

(1,949.4)

(62.1)

(393.9)

(8.6)

(2.9)

(467.5)

(8.6)

(476.1)

–

(134.5)

(331.4)

(795.0)

(66.5)

(90.4)

(1,283.3)

(1,276.7)

(2,560.0)

The presentation of non-current assets is based on the geographical location of the assets.

NON-CURRENT ASSETS

Australia
United States of America
United Kingdom
Other geographical locations
Total geographical non-current assets
Other non-current assets
Consolidated non-current assets

NON-CURRENT ASSETS

Australia
United States of America
United Kingdom
Other geographical locations
Total geographical non-current assets
Other non-current assets
Consolidated non-current assets

30 JUNE 2019
REPORTED
$M

INCREASE/
DECREASE

AASB 16

AASB 112

30 JUNE 2019
RESTATED
$M

1,629.0
1,776.8
151.4
109.4
3,666.6
165.0
3,831.6

97.7
372.0
0.8
13.3
483.8
34.7
518.5

144.3
–
–
0.8
145.1
–
145.1

1,871.0
2,148.8
152.2
123.5
4,295.5
199.7
4,495.2

30 JUNE 2018
REPORTED
$M

INCREASE/
DECREASE
$M

AASB 16

AASB 112

30 JUNE 2018
RESTATED
$M

1,567.0
1,716.6
137.9
121.7
3,543.2
160.7
3,703.9

51.0
357.8
1.2
15.8
425.8
28.6
454.4

144.2
–
–
0.8
145.0
–
145.0

1,762.2
2,074.4
139.1
138.3
4,114.0
189.3
4,303.3

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 117

AASB 2018-6
AASB 2018-7
AASB 2019-1

AASB 2019-5
AASB 17
AASB 10 and
AASB 128

AASB 2020-3

AASB 2020-1

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2020

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

Issued but not yet effective accounting standards
The following relevant accounting standards have recently been issued or amended but are not yet effective and have
not been adopted for this year-end reporting period.

REFERENCE

TITLE

Amendments to References to Conceptual Framework in IFRS Standards
Amendments to Australian Accounting Standards – definition of a Business
Amendments to Australian Accounting Standards – definition of Material
Amendments to Australian Accounting Standards – Interest Rate
Benchmark Reform
Disclosure of the effect of new IFRS Standards not yet issued in Australia
Insurance Contracts
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture (Amendments to AASB 10 and AASB 128)

APPLICATION

1 January 2020
1 January 2020
1 January 2020
1 January 2020

1 January 2020
1 January 2021

1 January 2022

Annual improvements 2018-2022 cycle (Amendments to AASB 1, 3, 9, 116, 137, 141)

1 January 2022

Classification of Liabilities as Current or Non-Current

1 January 2023

These standards are not expected to have a material impact on the Group’s financial position or its performance.

Other accounting policies
Finance income
Finance income is recognised as the interest accrues
(using the effective interest method, which applies a rate
that discounts estimated future cash receipts through
the expected life of the financial instrument) to the net
carrying amount of the financial asset.

Impairment of financial assets
The Group recognises an allowance for expected credit
losses (ECLs) for all debt instruments not held at fair
value through profit or loss. ECLs are determined using
historical recovery of contractual cash flows and the
amount of loss incurred, adjusted for current economic
and credit conditions.

An impairment loss is based on the difference between
the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to
receive, discounted at an approximation of the original
effective interest rate. Impairment losses on assets
classified as amortised cost are recognised in profit or
loss when they are expected, not when they are incurred.
If a later event causes the impairment loss to decrease,
the amount is reversed in profit or loss.

Derecognition of financial assets
The derecognition of a financial asset takes place when
the Group no longer controls the contractual rights that
comprise the financial instrument.

This is normally the case when the instrument is sold
or all the cash flows attributable to the instrument are
passed through to an independent third party.

Finance costs
Finance costs are recognised as an expense when they
are incurred, except for interest charges attributable
to major projects with substantial development and
construction phases, which are capitalised as part
of the cost of the asset.

Financial assets
A financial asset is classified as at fair value through
profit or loss or fair value through other comprehensive
income unless it meets the definition of amortised cost.
This is determined on initial recognition.

Financial assets classified as at amortised cost are
measured initially at fair value and adjusted in respect
of any incremental and directly attributable transaction
costs. All other financial assets are measured at fair
value on initial recognition.

Reclassification occurs only if there are fundamental
changes to the Group’s business model for managing
financial assets.

Amortised cost
A financial asset is classified as at amortised cost only if
the asset is held to collect contractual cash flows and the
contractual terms of the financial asset give rise to cash
flows that are solely payments of principal and interest.

A financial asset is measured at amortised cost using the
effective interest rate method. Any gains and losses are
recognised through the amortisation process or when the
financial asset is derecognised or impaired.

118 | TREASURY WINE ESTATES ANNUAL REPORT 2020

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

Derivatives
The Group uses derivative financial instruments such
as foreign currency contracts, interest rate swaps and
options to hedge its risks associated with interest rate
and foreign currency fluctuations. Such derivative
financial instruments are carried at fair value and
are financial assets when the fair value is positive
and financial liabilities when the fair value is negative.

For derivatives that do not qualify for hedge accounting,
any gains or losses arising from changes in fair value
are taken directly to profit or loss for the year.

Hedge accounting
For the purposes of hedge accounting, hedges are
classified as either fair value hedges when they hedge
the exposure to changes in the fair value of a recognised
asset or liability; cash flow hedges where they hedge
exposure to variability in cash flows that is either
attributable to a particular risk associated with a
recognised asset or liability or a forecasted transaction;
or hedges of a net investment in a foreign operation.

Initial recognition
At the beginning of a hedge relationship, the Group
designates and documents the hedge relationship and
the related risk management objective and strategy.
The documentation identifies the hedging instrument
and the hedged item as well as describing the economic
relationship, the hedge ratio between them and potential
sources of ineffectiveness. The documentation also includes
the nature of the risk being hedged and the method
of assessing the hedging instrument’s effectiveness.
To achieve hedge accounting, the relationship must be
expected to be highly effective and are assessed on an
ongoing basis to determine that they continue to meet
the risk management objective.

Re-balancing
If the hedge ratio for risk management purposes is no
longer met but the risk management objective remains
unchanged and the hedge continues to qualify for hedge
accounting, the Group will rebalance the relationship
by adjusting either the volume of the hedged item
or the volume of the hedging instrument.

Discontinuation
Hedge accounting is discontinued when the hedge
instrument expires or is sold, terminated or exercised,
or no longer qualifies for hedge accounting. At that point
in time, any cumulative gain or loss on the hedging
instrument recognised in equity is kept in equity until
the forecasted transaction occurs. If a hedged transaction
is no longer expected to occur, the net cumulative gain
or loss recognised in equity is transferred to profit
or loss for the year.

Gains or losses recognised directly in equity are
reclassified into profit and loss in the same period or
periods the foreign currency risk affects consolidated
profit and loss.

Fair value hedges
For fair value hedges (for example, interest rate swaps),
any gain or loss from remeasuring the hedging instrument
is recognised immediately in the statement of profit or loss
and other comprehensive income. Where the adjustment
is to the carrying amount of a hedged interest-bearing
financial instrument, the adjustment is amortised to
the statement of profit or loss and other comprehensive
income such that it is fully amortised by maturity.

Cash flow hedges
In relation to cash flow hedges (forward foreign currency
contracts) to hedge firm commitments, the portion of the
gain or loss on the hedging instrument that is determined
to be an effective hedge is recognised directly in equity
and the ineffective portion is recognised in the statement
of profit or loss and other comprehensive income.

When the hedged item gives rise to the recognition
of an asset or a liability, the associated deferred gains
or losses are included in the initial measurement of the
asset or liability.

For all other cash flow hedges, the gains or losses that
are recognised in equity are transferred to the statement
of profit or loss and other comprehensive income in the
same period in which the hedged firm commitment
affects the profit and loss, for example when the future
sale actually occurs.

NOTE 33 – CLASS ACTION

Two Australian shareholder class actions have been commenced against TWE Limited.

The first action was served on 2 April 2020 by Slater & Gordon (S&G) acting for Brett Stallard as trustee for the
Stallard superannuation fund. The second action was served on 1 May 2020 by Maurice Blackburn (MB) acting for
Steven Napier. The class in both proceedings comprise shareholders who purchased shares between 30 June 2018 and
28 January 2020. Both proceedings allege that the Company breached its continuous disclosure obligations under the
ASX Listing Rules and the Corporations Act and that it engaged in misleading or deceptive conduct in contravention
of the Corporations Act and the ASIC Act.

With regard to claims, the Company strongly denies any and all allegations made against it and is vigorously
defending the proceedings.

Based on the information currently available, the Company does not know the quantum of either class action.
No provision has been recognised at 30 June 2020 in respect of the claim.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 119

DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2020

In the Directors’ opinion:

(a) The financial statements and notes 1 to 33 are in accordance with the Corporations Act 2001, including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional

reporting requirements; and

(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its

performance for the financial year ended on that date.

(b) There are reasonable grounds to believe that Treasury Wine Estates Limited will be able to pay its debts

as and when they become due and payable.

to meet any obligations or liabilities to which they are or may become subject to, by virtue of the Deed of Cross
Guarantee described in note 29.

Note 1 confirms that the financial statements also comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as required
by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

Paul Rayner
Chairman

25 August 2020

Tim Ford
Chief Executive Officer

120 | TREASURY WINE ESTATES ANNUAL REPORT 2020

INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report

To the shareholders of Treasury Wine Estates Limited

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of
Treasury Wine Estates Limited
(the
Company).

In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:

 giving a true and fair view of the
Group’s financial position as at 30 June
2020 and of its financial performance
for the year ended on that date; and



complying with Australian Accounting
the Corporations
Standards
Regulations 2001.

and

The Financial Report comprises:

 Consolidated statement of financial position as at 30

June 2020;

 Consolidated statement of profit or loss and other
comprehensive income, Statement of changes in
equity, and statement of cash flows for the year then
ended;

 Notes including a summary of significant accounting

policies

 Directors’ Declaration.

The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.

We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with the Code.

KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under
Professional Standards Legislation.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 121

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Key Audit Matters

The Key Audit Matters we identified are:

 Valuation of inventory; and

 Recognition of discounts and rebates.

Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current period.

These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.

Valuation of inventory (total finished goods and work in progress inventory was $2,010.0
million)

Refer to Note 9 Working Capital to the Financial Report

The key audit matter

How the matter was addressed in our audit

The valuation of inventories of finished goods
and work in progress is a key audit matter as
we need to consider estimates and judgements
made by the Group. These include inherently
subjective judgements about forecast demand
and estimated market sales prices at the time
the wine is expected to be sold. We focus our
work on assessing the judgements contained in
the valuation models for:



the period of time over which some
harvested grapes are converted from work
in progress to bottled wine ready for sale
(the holding period) which can be a number
of years depending on the varietal and type
of wine; and

forecast demand and market sales prices,
which can fluctuate significantly over the
holding period and are influenced by the
fundamentals of the global wine industry,
including fluctuations in demand and supply
and other factors that impact agricultural
outputs. These factors influence the
Group’s determination of the most likely
market conditions at the estimated date of
sale. A key indicator for at-risk inventory
values, including finished goods and work in
progress in the holding period, is the
identification of current slow moving and
obsolete inventories. These can signal
changes in consumer demand patterns or
potential over-supply issues which may

Our procedures included:



testing key controls designed by the Group to
identify slow moving and obsolete inventories
(including wine held by third party distributors
and retailers), which if existing, may indicate
valuation issues with work in progress and
finished goods;

in progress and

testing year-end inventory valuation models, in
particular the identification and valuation of
work
finished goods
considered to be ‘at risk’ (i.e. where the costs
may potentially exceed the estimated net
realisable value at the time of sale). We
inventory
considered forecast sales plans,
holding reports (including wine held by third
party distributors and retailers), committed
future supply contracts and the outcomes of
the Group’s process to identify slow moving
and obsolete inventories. For a sample of ‘at
risk’ inventory we:

 evaluated the proposed inventory value against
brand strategies and forecast sales plans for
consistency;

 assessed the reasonableness of management’s
action plans in place to mitigate the risk that
wine will be sold below cost and facilitate the
sale of potential at risk inventory above cost;

 assessing

the

integrity of

valuation models
used,
mathematical accuracy of

inventory
the
including
the
the underlying

122 | TREASURY WINE ESTATES ANNUAL REPORT 2020

impact forecast prices.

calculation formulas;

 comparing, by product grade,

inventory
volumes in significant markets to both recent
and forecasted sales data to identify slow
moving and potentially ‘at risk’ inventories, and
assessing the computation of write-downs of
inventory to net realisable value;

 attending cycle counts and / or year-end
inventory counts in significant locations, which
included observing the process of identifying
slow moving and potentially obsolete inventory;

 comparing the estimated net realisable value of
slow moving inventories identified in prior
periods to actual sales outcomes subsequently
achieved, to assess the historical accuracy of
the Group’s forecasting process; and

 assessing the Group’s

inventory valuation
methodologies and the Group’s disclosures in
respect of inventory valuation against the
requirements of relevant accounting standards.

Recognition of discounts and rebates (Net Sales revenue, which is net of trade discounts and
volume rebates, was $991.2 million)

Refer to Note 3 Revenue of the Financial Report.

The key audit matter

How the matter was addressed in our audit

The Group’s policy is to record net sales revenue
at the time goods are shipped to customers
based on the price specified in the sales
agreement, net of any estimated discount or
rebate. In some cases, the discount or rebate
will not be finally determined or paid until the
inventory is depleted from the customer’s
warehouse, which may be some time after the
Group’s sale date to their customer. Sales
agreement terms and historical trends are used
by the Group to estimate the discounts. The
impact of any one-off events are considered by
the Group in the estimation of the accrual.

At year end, the Group estimates and accrues
amounts for discounts and rebates they consider
have been incurred and not yet paid. The Group’s
estimation of these amounts at the year-end is

Our procedures included:

 considering the appropriateness of the Group’s
accounting policy for the recognition and
measurement of net sales revenue, including
the policy for recording discounts and rebates,
by assessing compliance with applicable
accounting standards;



testing the estimation of discounts and rebates
accruals. We used underlying documentation
such as customer agreements, shipment and
depletion data, claims for discounts and rebates
along with cash payments made. We evaluated
the estimate, for a sample of customers, by:

 checking amounts to the agreements; and

 analysing sales and depletion to date, and

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 123

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

the number of unique

considered as a key audit matter due to the
significance of the Group judgements applied
and
customer
arrangements that are in place. For example, the
Group’s judgement is required to estimate the
accrual where discounts and
rebates are
dependent on customers achieving annual sales
targets and the performance year does not align
to the Group’s financial year.

depletion programs expected to take place in
future periods against sales budgets, depletion
plans and actual claims, to assess the estimate
of discounts and rebates incurred but not yet
paid.



testing key controls in significant jurisdictions
for calculating,
reviewing and approving
discounts and rebates;

 assessing the integrity of the discount and
including
the
the underlying

rebate models
mathematical accuracy of
calculation formulas;

used,

 challenging the nature and quantum of the
amounts recorded by reference to historical
sales, rebates paid and discounts paid. We also
tested, on a sample basis, the nature and level
of such amounts back to contractually agreed
terms;

 assessing the accuracy of the accrual in
previous years in order to challenge the Group’s
current year estimation processes; and

 considering

the Group’s disclosures with
respect to revenue, discounts and rebates
accruals
standard
requirements.

accounting

against

Other Information

Other Information is financial and non-financial information in Treasury Wine Estates Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors
are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information.
In doing so, we consider whether the Other Information is materially inconsistent with the Financial
Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.

124 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

 preparing the Financial Report that gives a true and fair view in accordance with Australian

Accounting Standards and the Corporations Act 2001



implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error

 assessing the Group and Company’s ability to continue as a going concern and whether the use
of the going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they
either intend to liquidate the Group and Company or to cease operations, or have no realistic
alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:



to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and

to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 125

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Report on the Remuneration Report

Opinion

Directors’ responsibilities

In our opinion, the Remuneration Report of
Treasury Wine Estates Limited for the year
ended 30 June 2020, complies with
Section 300A of the Corporations Act 2001.

The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report
in accordance with Section 300A of the Corporations Act
2001.

Our responsibilities

We have audited the Remuneration Report included in
pages 44 to 63 of the Directors’ report for the year ended
30 June 2020.

Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

KPM_INI_01

KPMG

Gordon Sangster

Partner

Melbourne

25 August 2020

126 | TREASURY WINE ESTATES ANNUAL REPORT 2020

DETAILS OF SHAREHOLDERS, SHAREHOLDINGS
AND TOP 20 SHAREHOLDERS

DETAILS OF SHAREHOLDERS AND SHAREHOLDINGS

Holding of securities

LISTED SECURITIES 6 AUGUST 2020

Fully paid ordinary shares

NO. OF
HOLDERS

NO. OF
SHARES

% HELD BY
TOP 20

84,280 720,800,351

84.45

SIZE OF HOLDING

1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total

NO. OF
HOLDERS

TOTAL %
HELD

58,487
22,644
2,143
950
56
84,280

3.31
6.59
2.05
2.83
85.21
100

As at 6 August 2020, the number of shareholders holding less than a marketable parcel of $500 worth of shares,
based on the closing market price on that date of $10.79 per share, is 1,619.

TWENTY LARGEST SHAREHOLDERS – 6 AUGUST 2020

RANK SHAREHOLDER

NO. OF FULLY PAID
ORDINARY SHARES

% OF FULLY PAID
ORDINARY SHARES

HSBC Custody Nominees
J P Morgan Nominees Australia
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
National Nominees Limited
Merrill Lynch (Australia) Nominees Pty Limited
Argo Investments Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Avanteos Investments Limited
Netwealth Investments Limited
Mutual Trust Pty Ltd
Milton Corporation Limited
AMP Life Limited
Avanteos Investments Limited
BKI Investment Company Limited
BNP Paribas Noms (NZ) Ltd
CS Third Nominees Pty Limited
Netwealth Investments Limited
UBS Nominees Pty Ltd
Washington H Soul Pattinson and Company Ltd

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total

286,664,034
179,412,690
54,950,462
29,685,238
22,770,502
17,911,553
3,250,000
2,790,898
2,016,271
1,343,894
1,234,963
1,206,363
1,058,254
895,920
850,301
639,337
594,220
511,956
505,847
450,000
608,742,703

39.77
24.89
7.62
4.12
3.16
2.48
0.45
0.39
0.28
0.19
0.17
0.17
0.15
0.12
0.12
0.09
0.08
0.07
0.07
0.06
84.45

SUBSTANTIAL SHAREHOLDERS – 6 AUGUST 2020

The following shareholders have declared a relevant interest in the number of voting shares at the date of giving the
notice under Part 6C.1 of the Corporations Act.

INSTITUTION

Blackrock Group
Capital Group
The Vanguard Group

NO. OF FULLY PAID
ORDINARY SHARES

% OF FULLY PAID
ORDINARY SHARES

45,409,316
43,650,149
35,954,902

6.3
6.1
5.0

TREASURY WINE ESTATES ANNUAL REPORT 2020 | 127

SHAREHOLDER INFORMATION

ANNUAL GENERAL MEETING

ELECTRONIC COMMUNICATIONS

The Annual General Meeting of the Company will be held
on Thursday 5 November 2020 (AEDT). Full details will be
contained in the Company’s Notice of Meeting to be available
on the Company’s website prior to the meeting.

VOTING RIGHTS

Shareholders are encouraged to participate in the Annual
General Meeting, however, when this is not possible,
shareholders may appoint a proxy to participate in the
Annual General Meeting in their place.

Every shareholder participating in the Annual General
Meeting personally or by proxy, attorney or representative
has, on a poll, one vote for each fully paid share held.

SECURITIES EXCHANGE LISTING

Treasury Wine Estates Limited shares are listed on the
Australian Securities Exchange under the code ‘TWE’.

Treasury Wine Estates Limited ordinary shares are traded
in the US in the form of American Depositary Receipts (ADR)
issued by The Bank of New York Mellon as Depositary.

SHARE REGISTER AND OTHER ENQUIRIES

If you have any questions in relation to your shareholding,
share transfers or dividends, please contact our share registry:

Computershare Investor Services Pty Limited
Yarra Falls 452 Johnston Street
Abbotsford Victoria 3067
Australia

Telephone: 1800 158 360 (Australia)
International: +61 3 9415 4208
Facsimile: +61 3 9473 2500
For faxing Proxy Forms only: +61 3 9473 2555
(outside Australia) or 1800 783 447 (within Australia)
Website: www.investorcentre.com/contact

Please include your securityholder reference number (SRN)
or holder identification number (HIN) in all correspondence
to the share registry.

The Company has an online share registry facility where
shareholders can:

• check their current and previous holding balances;

• update their address details;

• update their bank details;

• review their dividend history;

• confirm whether they have lodged a TFN/ABN exemption;

• elect to receive communications and Company information
electronically and change their Annual Report election;

• download commonly used forms; and

• elect to receive email notification when dividend statements

and issuer sponsored holding statements are available
to view online.

To access the online share registry, log on to www.tweglobal.
com, go to the Shareholder Information section located under
the Investors menu and click the ‘online share registry’ icon.
For security and privacy reasons, shareholders will be required
to verify their identity before they can view their records.

TAX FILE NUMBERS, AUSTRALIAN BUSINESS
NUMBERS OR EXEMPTIONS

Australian taxpayers who do not provide details of their tax
file number will have any unfranked portions of dividends
subjected to the top marginal personal tax rate plus Medicare
levy (if applicable). It may be in the interests of shareholders
to ensure that tax file numbers have been supplied to the share
registry. Shareholders may request a form from the share
registry or submit their details via the online share registry.

CHANGE OF ADDRESS

It is important for shareholders to notify the share registry
of any change of address. As a security measure, the previous
address should also be quoted as well as your securityholder
reference number (SRN). Shareholders may access the online
share registry to submit their details or download a personalised
change of address form.

For enquiries relating to the operations of the Company, please
contact the Investor Relations team on:

SHAREHOLDER WINE OFFER –
CELLARDOOR.CO & CELLAR360.COM

Telephone: +61 3 8533 3000
Facsimile: +61 3 9685 8001
Email: investors@tweglobal.com
Website: www.tweglobal.com

Address: Level 8, 161 Collins Street
Melbourne Victoria 3000
Australia

ADR Depositary and Transfer Agent:
BNY Mellon Shareowner Services
462 South 4th Street, Suite 1600
Louisville KY 40202
United States of America
Postal address: PO Box 505000
Louisville KY 40233 – 5000
United States of America
Telephone: 1888 269 2377 – toll free (US)
International: +1 201 680 6825
Email: shrrelations@cpushareownerservices.com
Website: www-us.computershare.com/investor

128 | TREASURY WINE ESTATES ANNUAL REPORT 2020

Shareholders in Australia and the US have the opportunity
to purchase the Company’s wines through Cellardoor.co and
cellar360.com, respectively.

Cellardoor.co is an exclusive members-only online wine
community for shareholders and family and friends of Treasury
Wine Estates. The virtual cellar door provides 24/7 access
to an exceptional range of wines from Treasury Wine Estates’
award-winning wineries at exclusive shareholder prices.
Shareholders in Australia can register for Cellardoor.co by
visiting https://invite.cellardoor.co/twe-shareholder1, and
entering the access code 89374. Shareholders in the US can
shop the Treasury portfolio at cellar360.com.

TREASURY WINE ESTATES LIMITED

ABN 24 004 373 862

COMPANY SECRETARY

Kirsten Gray BA LLB (Hons), PDM

REGISTERED OFFICE

Level 8, 161 Collins Street
Melbourne Victoria 3000 Australia
Telephone: +61 3 8533 3000